The recovery of the Swiss economy from the deepest recession in decades looks set to gain traction, a record jump in the country's leading growth barometer KOF in September showed on Wednesday. The surprisingly sharp rise in the barometer supported the Swiss franc and economists said that each set of positive data increased the chance that the Swiss National Bank may exit its ultra-loose policy earlier than so far assumed.
The KOF leading indicator soared to 0.85 from a -0.04 in August, the KOF Swiss Economic Institute said in a statement, turning positive for the first time since October 2008 and hitting its highest level since July 2008. Signs have been mounting recently that Switzerland is moving out of the deep recession, which it slipped into in mid-2008 as the global slump hit its exporters hard.
The KOF said that all sub-indicators, including the ones for banks, manufacturers and for exports improved in September. The KOF data supported the franc, which traded 0.2 percent higher on the day against the euro at 1.5084 per euro, moving closer to levels where trader see the risk of a central bank intervention. The Swiss National Bank forecast an economic decline of between 1.5 and 2.0 percent this year, potentially the worst drop since 1975.
The SNB and the Swiss government see the country returning to economic growth next year. Both have warned against the risks of a backlash, however, and the central bank has kept its ultra-loose monetary policy in place. "We see a rate hike in the third quarter 2010," UBS analyst Reto Huenerwadel said. "With every strong set of economic data, the risks of an earlier move rises, though we think they would need a very good reason to move ahead of the ECB."
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