Thursday January 8, 11:11 AM
UPDATE 1-Swiss inflation down, jobless up as downturn bites
By Sven Egenter
ZURICH, Jan 8 (Reuters) - Swiss annual inflation eased sharply in December thanks to cheaper oil while unemployment rose to its highest in almost 2 years as the drop in global demand for Swiss goods forced more firms to axe jobs.
Thursday's weak economic data added to views that the Swiss National Bank will slash interest rates further and might even turn to unconventional measures soon to support the economy, which has so far held up better than many European neighbours.
Consumer prices fell by 0.5 percent on the month, taking the annual inflation rate down to 0.7 percent in December from 1.5 percent in November, the Federal Statistics Office said.
The annual inflation rate was the lowest since September 2007 and well below economists' median forecast of 1.0 percent in a Reuters poll.
The number of unemployed hit its highest in nearly 2 years in December with the unemployment rate up at 3.0 percent after 2.7 percent in November, the State Secretariat for Economic Affairs (SECO) said in a separate release.
'For the first time since 2003, unemployment is higher at year-end than at the beginning of the year,' the SECO said.
Switzerland has held up relatively well during the credit crisis despite the hefty losses of its largest bank UBS (Virt-X: UBSN.VX - news) but the downturn in major trading partners such as Germany is hitting exports and turned Swiss companies increasingly gloomy.
'Following on from some pretty disastrous unemployment figures this morning, the CPI (NYSE: CPY - news) release suggests a move to an (annual) negative inflation rate earlier than previously expected,' said 4Cast analyst Saara Tuuli.
'Further moves by the SNB are expected for the first quarter, with a further rate cut at the SNB's March meeting remaining a distinct possibility,' she said.
DEFLATION FEARS
The Swiss National Bank has slashed its target rate for the 3-month Swiss franc LIBOR by a total of 2.25 percentage points to a mere 0.5 percent over the last three months to support the economy, which the central bank sees shrinking this year.
The central bank is widely expected to ease conditions further, possibly by unconventional means beyond cutting rates, as price pressures are fading quickly due to the economic slump.
The SNB expects inflation to fall to an average of 0.9 percent in 2009 and 0.5 percent in 2010 from 2.4 percent in 2008, which was the highest since 1993.
'The pace of the deceleration in (inflation), from 3.1 percent year-on-year as recently as July and 2.6 percent in October, will be a concern for the SNB,' said Deutsche Bank (Xetra: 514000 - news) analyst Henrik Gullberg. 'Interest rates at zero in the near future seems increasingly likely.'
The decline in inflation might even pick up more speed, as the country's leading retail chains have just entered a fresh round of price cuts because the imminent market entry of German discount chain Lidl is heightening competition.
Sarasin analyst Alessandro Bee said that fears of deflation were likely to arise although the current drop in inflation was due to lower import prices -- mainly for oil -- and as such it is boosting the Swiss consumers' spending power.
'But if the downturn on the labour market starts to show in wages in 2010 it might get more critical,' he said.
The December unemployment report indicated that firms were likely to scale back further on staffing levels: The number of vacancies fell to 9,744, the lowest number since January 2006.
(Reporting by Sven Egenter; editing by Stephen Nisbet) Keywords: SWISS ECONOMY/
|
|
|
Send Article by Email
Send Article by IM
Blog This with Y! 360
Printable View
