Swiss Economic Growth Unexpectedly Strengthens on Consumers
The economic expansion in Swiss has suddenly accelerated in the initial quarter to a speedy pace in one and a half years. This unexpected strength is attributed to consumer demand.
The SSEA in Bern has noted that the country’s GDP increased by 0.7% from the last quarter, moving up by a revised 0.5%. Apparently, this is the strongest increase since the 3rd quarter of 2010. Reports from Bloomberg News indicate that economists had predicted that the economy would stop.
It is also clear that the country’s economy might struggle to expand in the present quarter following a push of the countries into recession by the financial turmoil in the Euro zone. This push has also eroded demand across the entire region. Thomas Jordan, the president of Swiss Central Bank, has also warned that the country might face some serious challenges in 2012, adding that strategists will have to uphold their Franc maximum of 1.20 against the Euro for the short term in an attempt to safeguard the economy and exporters.
UBS AG’s economist, Reto Huenerwadel, has said that such a development is a great surprise that shows there is higher private consumption. He also added that there is no foreseeable slump this year noting that the SNB’s top limit has a stabilizing effect.
The franc was selling at 1.2010 against the euro starting at 8:08 am in Zurich. Very little change occurred since yesterday.
Reports indicate that Consumer spending increased by 0.6% in the initial quarter. Commodity export dropped by 0.4% while exports of services rose by 2.6%. Government spending rose by 2% from the last quarter while gross fixed capital spending dropped by 1.5%, following a decline in construction.
Reports from the OECD indicate that Switzerland’s economic development will strengthen in the 2nd half of 2012. GDP may also go up by 1.9% by 2013. This is especially true considering that consumers have already created exports and spending rebound.
Speaking to press Jordan said that franc is a changed currency and is expected to depreciate due to economic fundamentals. He also noted that it would be counterproductive and deadly to manipulate the franc indiscriminately.
SNB, which introduced the franc top limit in September following a surge in franc versus the euro, is expected to conduct its next financial assessment in June.