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Swiss Inflation Turns Negative

James Boston
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Swiss Inflation Turns Negative

Switzerland is not winning in it’s battle to stimulate inflation if the latest figures published this morning are anything to go by. September’s Consumer Price Index (CPI) has registered a deflationary -0.1% when measured on a year on year basis, Switzerland had managed six months of moderately positive or flat price growth prior to today’s announcement that the economy has once again become deflationary, in fact a figure of 0.0% was anticipated this morning following the August posting of a 0.1% increase in general prices. The month on month figure is a little more welcome, this is showing an expansion of 0.1% on the month compared to a reading of 0.0% in August, expectations however were for a 0.2% increase in the monthly CPI.

Growth forecasts for Switzerland have been slashed recently following the report that second quarter GDP failed to grow, the latest official prediction is for full year expansion of 1.4%, this is down from the 2.0% forecast at the beginning of the 2014. With full employment and a relatively low public debt there is plenty of cushion in the Swiss economy to prevent any serious concerns imminently taking hold. The strong Franc has hurt trade but so too has the geopolitics of the Ukraine and the stagnation of Switzerland’s major trading partners in the Eurozone, falling domestic demand in Germany has particularly dented Swiss exports. Long term this should area of the economy should recovery and perhaps even strengthen further once the full effects of the bilateral trade deal with China are felt.

In the interim the initial signs of weakness in the domestic economy appear to be dissipating. Real Retail Sales figures published this morning for the month of August are showing year on year expansion of 1.9%, this is a significant turnaround on the July reading of -0.3%.

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