Switzerland unexpectedly avoided a recession last quarter as investment and private consumption helped return the economy to growth.
Gross domestic product increased 0.2% in the three months through June, after a contraction of 0.2% in the previous quarter, the State Secretariat for Economic Affairs in Bern said on Friday, Bloomberg reported.
Economists forecast a 0.1% contraction, which would have pushed Switzerland into its first recession in six years. The Swiss franc fell against the euro.
Seven months after the Swiss National Bank scrapped its currency ceiling, allowing the franc to float freely again, the economy is grappling with headwinds. With the currency up about 11% since the Jan. 15 decision, consumer prices are slumping and exporters say margins are being squeezed.
“I’m surprised it was positive–it was to be expected that consumption would be a support, it’s more of a surprise that investments were so strong,” said Alessandro Bee, a strategist at Bank J. Safra Sarasin Ltd. in Zurich. “Still, the prospects for Swiss exports have clouded over. The euro is still strong and emerging markets aren’t supportive.”
The franc weakened 0.24% to 1.08 against the euro in Zurich.
Equipment and software investment increased 1.5% in the second quarter compared with the previous three months, the data showed. Exports of goods excluding non-monetary gold, valuables and trading rose 0.5%, with positive contributions from watch-making, jewelry and precision instruments as well as the chemical and pharmaceutical industry.
Investment Spending
“The balance of trade in goods made a positive contribution to GDP growth because imports fell more than exports,” the SECO said in a statement. “Consumption expenditure by private households and government together with investments also provided support.”
In a bid to dissuade investors from holding francs, the SNB in mid January cut its deposit rate to a record low of minus 0.75% and has since repeatedly pledged currency interventions.
That stance isn’t likely to chance any time soon, SNB President Thomas Jordan said in a newspaper interview last week. The central bank’s next rate decision is on Sept. 17.
“Our monetary policy is taking the current difficult situation into account,” Jordan told UnternehmerZeitung.
Growth Forecast
The SNB in June forecast economic growth of “just under” 1% in 2015. It sees consumer prices falling 1% this year and 0.4% in 2016, with the annual inflation rate turning positive only in 2017.
Economists polled in Bloomberg’s monthly survey, published last week, predict output will expand 0.1%. The median forecast is for GDP to increase 0.2% in the final three months of the year.
Momentum in coming months could get a boost from a fall in the price of oil and a weaker franc–which has depreciated against the euro since late June.
