Switzerland Exits Recession In Q3

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Switzerland's economy exited recession in the third quarter as the gross domestic product grew after declines in past four quarters.

The State Secretariat for Economic Affairs said the Swiss GDP climbed 0.3% sequentially in the third quarter after declining at the same pace in the second quarter. Growth in the third quarter was in line with economists' expectations.

"The Swiss economy has emerged from the deep recession faster than many had thought," ING economist Julien Manceaux said. Recovering European demand and a stabilized Swiss Franc possibly allowed net exports to contribute positively to growth in the third quarter, the economist noted.

Household consumption rose 0.7%, slightly faster than the 0.6% rise in the second quarter and government spending grew 0.6% following 0.5% rise in the previous quarter. Gross fixed capital formation recovered strongly by growing 3.4% after a 0.6% decline in the previous quarter. Out of which, investment on fixed assets and software rebounded 5.5% in the third quarter following a 2% drop in the second quarter, while investment in construction rose at a slower pace of 0.7% compared to 1.2% growth in the previous quarter. Growth in Switzerland's domestic demand quickened to 1.3% from 0.4%.

Total exports recovered in the third quarter after declines in past four quarters. They grew 2.6% after a 2.2% fall in the previous quarter. Exports of goods rebounded 3.6% and those excluding valuables recovered by growing 2.2%. Exports of services climbed 0.3%, ending declines in past four quarters. Similarly, total imports grew 2.2% in the third quarter after a 4.1% contraction in the second quarter. Imports of goods grew 3%, goods excluding valuables rose 3.6%, while imports of services fell 0.8%.

On an annual basis, GDP fell 1.3%, slower than the 2.4% drop recorded in the second quarter and a 1.5% decline economists' had forecast. GDP has been falling since the fourth quarter of 2008. The year-on-year decline illustrates that things are still far from normal, the ING economist noted. The GDP deflator fell 0.5% year-on-year following 0.8% rise in the second quarter.

The Swiss National Bank currently expects the economy to shrink between 1.5% and 2% this year. The chairman of the central bank, Jean-Pierre Roth, is of the view that 2010 would be another difficult year. He said on November 24 that current unconventional policy measures will have to be unwound soon to avoid medium-term inflationary pressures as the economy recovers. The Organisation for Economic Co-operation and Development forecasts 1.9% contraction this year and 0.9% growth in 2010.

In September, the SNB retained its three-month libor target range unchanged at 0%-0.75%. The central bank is due to review its monetary policy next week. "We are not expecting any change in the target for the 3-month Libor before the second half of 2010," ING economist said adding that the SNB may pave the way for a progressive withdrawal of excessive liquidity.

Switzerland's economy exited recession in the third quarter as the gross domestic product grew after declines in past four quarters. (Market News Provided by RTTNews)