BASEL: Switzerland’s economy stalled in the third quarter, as sluggish consumption and weak trade kept a lid on economic activity.
Gross domestic product was unchanged from the previous quarter and up 1.3% from a year earlier, the economic affairs ministry said Friday. Although some payback was expected after the second quarter’s surprisingly fast growth rate, the year-on-year increase in GDP last quarter was below analysts’ forecasts for 1.8% growth.
Consumption increased 0.1% on the quarter. Exports of goods, excluding valuables, fell 0.2%, driven by weakness in precision tools, watches and jewelry, the ministry said.
The luxury watch sector, in particular, has faced severe pressure in recent months as softer global growth and weakness in key markets such as Hong Kong have pressured sales. Swiss watch exports were down 12% on an annual basis in October.
The GDP report will likely keep pressure on the Swiss National Bank to continue in its efforts to weaken the Swiss franc.
The SNB has one of the deepest negative deposit rates among global central banks, at -0.75%, in a bid to reduce the attractiveness of Swiss assets. It has also intervened massively in currency markets in recent years, pushing its stock of foreign reserves to well over 600 billion Swiss francs ($594 billion), roughly the size of Switzerland’s entire GDP.
The SNB meets on Dec. 15 and is expected by economists to keep its deposit rate unchanged and to continue signaling its willingness to intervene in currency markets.
“Any monetary policy normalization will, however, remain unlikely before the end of 2018,” said ING Bank economist Julien Manceaux.
