Bloomberg News

Swiss Economy Grows at Slowest Pace in More Than Two Years

December 01, 2011

(Updates with comment from economist in fourth paragraph.)

Dec. 1 (Bloomberg) -- Switzerland’s economy grew at the slowest pace in more than two years in the third quarter as companies cut spending and exports slumped.

Gross domestic product rose 0.2 percent from the second quarter, when it increased 0.5 percent, the State Secretariat for Economic Affairs in Bern said today. That’s the slowest pace since the second quarter of 2009. Economists forecast a gain of 0.1 percent, the median of 20 estimates in a Bloomberg News survey showed. Exports of goods and services fell 1.2 percent and investment including construction slipped 1 percent.

Switzerland’s economy is cooling as the franc’s 7 percent ascent against the euro over the past year undermines foreign sales just as global growth weakens. The KOF economic barometer dropped to the lowest in more than two years in November and Swiss central bank Vice President Thomas Jordan said last month the economy “is entering a difficult phase, with a very low and possibly even slightly negative growth rate.”

“Switzerland came off lightly in the third quarter, but the worst is yet to come,” David Kohl, deputy chief economist at Julius Baer Group in Frankfurt, said by telephone. “The country’s export-led economy won’t be able to decouple from the euro-area slowdown and will slide into recession.”

The franc was little changed versus the euro, the currency of the country’s biggest export market, after the release and traded at 1.2277 at 8:49 a.m. in Zurich. Against the dollar, the franc was at 91.28 centimes.

Swiss Slowdown

In the year, the economy expanded 1.3 percent, down from 2.2 percent in the second quarter, today’s report showed. The state secretariat had previously reported a second-quarter expansion of 0.4 percent from the first quarter.

Private consumption spending gained 0.1 percent in the third quarter, unchanged from the previous three months, today’s report showed. Imports fell 0.2 percent from the second quarter, when they declined 0.7 percent.

The Swiss economy may grow 1.8 percent this year and 0.8 percent in 2012, the Organization for Economic Cooperation and Development said on Nov. 28, calling currency developments the main threat to growth. The Paris-based group had previously projected gross domestic product to rise 2.5 percent in 2012.

Holcim Ltd., the world’s second-largest cement maker based in Jona, Switzerland, said last month third-quarter profit fell on rising energy costs and the strength of the franc. Credit Suisse Group AG, Switzerland’s second-biggest bank, last month announced further job cuts to lower costs.

“Swiss GDP growth in the second half of this year looks likely to be very disappointing,” Dirk Schumacher and Adrian Paul, analysts at Goldman Sachs Group Inc., said in a note. “While the franc has admittedly depreciated when compared with the summer, it still remains overvalued,” weighing on exports.

The Swiss central bank on Sept. 6 imposed a franc limit of 1.20 versus the euro to fight deflation threats and help exporters. The central bank will hold its next monetary policy assessment on Dec. 15, when it will also publish its first outlook for 2012 economic growth.

--With assistance from Harumi Ichikura in London. Editors: Simone Meier, Jennifer M. Freedman

To contact the reporter on this story: Klaus Wille in Zurich at kwille@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net


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