Analysts from Wells Fargo point out that real GDP growth in Switzerland came in below expectations in Q2 on top of downward revisions to Q1, according to data released today. They consider that with inflation still low, the Swiss National Bank is unlikely to tighten monetary policy anytime soon.
Key Quotes:
“Data released this morning revealed that real GDP in Switzerland grew 0.3 percent in Q2 (1.1 percent annualized), undershooting consensus expectation for 0.5 percent sequential growth (top chart). On a year-overyear basis, real GDP in Switzerland is up just 0.3 percent, the slowest pace since 2008.”
“Against this relatively weak economic backdrop, price growth in Switzerland has managed to escape deflation territory. Even with the recent gains, however, inflation remains remarkably modest; core CPI inflation was 0.4 percent in August, which was the highest reading since March 2011. Year-ago consumer price growth has averaged -0.3 percent over the past five years, so the Swiss National Bank (SNB) may want to wait and ensure that inflation expectations are well-anchored above zero percent before making any major changes to monetary policy.”
“Our currency strategy team looks for the Swiss franc to strengthen versus the U.S. dollar amid generalized greenback weakness. Against the euro, however, our currency team expects a continued slide in the value of the franc. Economic growth in the Eurozone and Switzerland has diverged, and the SNB has signaled that it still believes the franc is overvalued. As such, the SNB will likely lag the European Central Bank in its efforts to start removing monetary policy accommodation.”
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