Switzerland's economy slowed slightly in the third quarter as the strength of the Swiss franc hit exports, adding to the case for the Swiss central bank to keep interest rates low despite strong consumer spending. The State Secretariat for Economic Affairs (SECO) said gross domestic product rose by 0.7 percent in real terms compared to the second quarter, slightly more than analysts had expected. It also revised down growth rates for the two previous quarters.
"Swiss franc strength and the global slowdown in Q3 have taken their toll on exports," Nikola Stephan, analyst at Informa Global Markets, said. "But together with the downward revision, the Swiss GDP remains broadly in line with expectations and should thus leave the SNB on course for at least two more unchanged rate verdicts."
The franc has appreciated over the last month against the euro, trading around 1.3180 per euro on Thursday, within sight of the all-time high hit at 1.2763 per euro in early September. Swiss exports of goods fell by 1.2 percent on the quarter and imports were down 1.0 percent, the SECO said. Consumer spending rose by 0.3 percent, company investment was 0.9 percent higher and construction spending increased 0.4 percent.
The Swiss National Bank said after its latest policy meeting in September that the economy faced a "marked" slowdown due to the strong franc and the cooling of the global economy. But so far early indicators such as the KOF growth barometer point only to a moderate easing of the Swiss economy, which the SNB sees growing by around 2.5 percent in 2010.
The year-on-year growth rate stood at 3.0 percent in the third quarter, the SECO data showed. The central bank will provide an update on its growth and inflation forecasts at its next policy meeting on December 16, where markets and analysts expect unchanged rates. "The franc's strength has already tightened monetary conditions and therefore the SNB will not raise rates now," Sarasin analyst Ursina Kubli said.
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