Investor morale in Switzerland improved sharply in September, a record rise in the country's ZEW investor sentiment indicator showed on Wednesday, adding to recent signs the economy is moving out of recession. Switzerland slipped into its worst recession in over 30 years in the middle of last year but has weathered the crisis better than many of its peers thanks to resilient consumers and the drastic actions taken by its central bank.
A 1 percent year-on-year rise in retail sales in July highlighted the resilience of Swiss consumers, who kept spending on food, electronics and household products. The Swiss ZEW indicator jumped nearly 40 points in September to 58.0, said Credit Suisse, which issues the indicator in co-operation with the German ZEW economic research institute.
This was the largest month-on-month increase and the highest value recorded so far since the indicator's launch in June 2006, Credit Suisse economist Marcel Thieliant said. But the Swiss National Bank is seen sticking to its full set of drastic measures - including ultra-low interest rates and currency intervention to fight a rise in the Swiss franc - to ensure the recovery is really gaining traction.
The SNB will update markets on its monetary policy and its assessment of the economy after its quarterly meeting on Thursday. "The risks to growth and in turn consumer prices remain on the downside and hence the SNB are widely expected to keep the interest rate low and continue with other easing measures during their meeting this week," 4Cast analyst Saara Tuuli said.
Many economists raised their growth outlook for Switzerland after a string of surprisingly strong Swiss economic data and signs of a recovery in key export markets such as Germany and many expect the SNB to also raise its forecast. So far, the SNB predicts a fall in gross domestic product by 2.5 to 3.0 percent in 2009 and a slow recovery next year.
The ZEW survey also showed, however, that a vast majority of investors and analysts asked do not expect a change in policy from the SNB soon despite the improving economy. A Reuters poll also showed last week that all economists expect the SNB to keep its interest rate target at 0.25 percent on Thursday. SNB board member Thomas Jordan cautioned in a recent speech that the worst may be still to come for the Swiss labour market and consumer spending was set to be hit by rising unemployment.