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Swiss economic growth unexpectedly stalled in the third quarter, with momentum held back by weak performance in the energy, construction and financial sector. Output was unchanged in the three months through September, after increasing of 0.2 percent in the prior period, the State Secretariat for Economic Affairs in Bern said on Tuesday.
Economists in a Bloomberg survey had forecast a growth rate of 0.2 percent in the third quarter. The first-quarter growth rate was revised down to minus 0.3 percent from minus 0.2 percent. “We’re currently in a trough, you see that in the trade figures: there’s still some digesting of the franc shock that needs to be done,” said Cornelia Luchsinger, an economist at Zuercher Kantonalbank. “But for the next year we clearly see a recovery.” The economy has suffered this year due to the franc, which Swiss National Bank officials have termed “significantly overvalued,” even with record-low interest rates and a pledge to purchase foreign currency.
Switzerland’s rate setters could find themselves easing policy further to prevent a surge in the franc if their euro-area counterparts boost stimulus on Dec. 3, thereby weakening the 19-country region’s currency. The franc, which traded at 1.08667 per euro at 8:21 a.m. in Zurich on Tuesday, has appreciated roughly 11 percent against the common currency since mid January, when the SNB abolished its minimum exchange rate. As a result, exports have weakened, and the manufacturing, tourism and retail sectors experienced a drop in demand.
Still, cheaper imports mean Swiss shoppers have seen their purchasing power rise. “Fears that the economy and in particular industry would collapse after the franc’s appreciation haven’t proved true — fewer jobs were cut than expected,” SNB President Thomas Jordan told Handelszeitung in an interview last week. “But the process of adjustment isn’t over yet. In the course of the next year unemployment should rise a bit.” Household consumption and that of non-profit organizations reported growth of 0.4 percent in the third quarter compared with the previous three months, the SECO data showed. The greatest contribution to growth came from health care, transport, housing and energy, it said. Investments in construction showed a “clear reduction.” By Catherine Bosley – Bloomberg. Read more.