Swiss retail sales growth slows

Swiss retail sales growth slowed in June, despite the Euro 2008 soccer championship, data showed on Monday, bolstering views that the Swiss National Bank may have to lower interest rates in order to spark growth. Retail sales grew 0.7 percent year-on-year when adjusted for price swings, down from 7.4 percent in May.
June sales grew 4.7 percent when also adjusted for the number of shopping days, the Federal Statistics Office said. Analysts in a Reuters survey had expected retail sales to grow by 3.2 percent on the year, though the forecasts ranged from a 2 percent fall to a 4 percent rise. The slowdown in June comes despite the Euro 2008 soccer tournament, which saw hundreds of thousands of fans flock to the Alpine country and spend millions of francs on beer and bratwurst.
"The figures suggest that the consumer sector is coming under increasing pressure ... and implies that the consumption contribution to growth for H2 is unlikely to be very encouraging," said Informa Global Markets analyst Rajel Khambhaita. "The next rate move is set to be downwards for the SNB, most likely in December," he said.
Swiss consumers have kept spending high over the last couple of months as employment is at record levels and wages are rising, but a drop in consumer sentiment to the lowest level in 4-1/2 years has raised concerns about future consumption.
Record inflation and a slowing economy have weighed on the consumer mood, a survey showed last week. But some analysts were upbeat about the resilience of the Swiss consumer and still expect consumption to cushion some of the slowdown in exports and the banking sector, which has been hit by the credit crisis. "Despite this weakening, retail sales figures suggest that spending remains robust, supported by the tight labour market," said 4Cast Limited analyst Saara Tuuli.
"We expect Swiss private consumption to support GDP growth throughout 2008 and, given that CPI inflation is expected to trend downwards in the second half of 2008, we see rates on hold at 2.75 till year end," she said.
The Swiss franc continued to trade lower versus the euro following the data, while interest rate futures showed that markets expect the SNB to keep rates on hold this year. The SNB, which left its target rate for the 3-month Swiss franc LIBOR unchanged at 2.75 percent in June despite record inflation, expects economic growth to slow to between 1.5 and 2.0 percent this year from 3.1 percent in 2007.