Consumer confidence plunges, jobless rate rises

Unemployment is on the up in Switzerland Keystone

Swiss consumer confidence plunged and unemployment rose in October, adding fresh evidence of a weakening economy that could trigger another Swiss interest rate cut soon.

Consumer spending has been a pillar of Swiss economic growth this year as a global slowdown crimps demand for exports, but growing concern about economic developments undercut private households’ confidence last month.

The confidence index dropped to minus 17 points in October from plus 12 points in July, the steepest drop since the start of the Gulf war 11 years ago, the State Secretariat for Economic Affairs (SECO) said on Thursday.

The index, based on a quarterly survey of households, has been declining since it hit 25 points in January, the peak of a cycle which started its upswing from minus 41 points in the third quarter of 1996.

Seco also reported that the unemployment rate rose to 1.9 per cent in October from 1.7 per cent in September.

Economy Minister Pascal Couchepin had let the number slip during a visit to Brussels this week. Before that, economists had been looking for a rate of 1.8 to 1.9 per cent.

Internet job adverts decline

The downturn in the job market was mirrored by a decrease in the number of Swiss employment adverts published on the Internet, according to Internet employment agency jobpilot.ch.

Its activity index dropped back by 21 per cent at 92 points over the three months to the end of October. The index, which began at 100 in January 2001, has dropped back 8 per cent over the first ten months of the year.

The fall in the third quarter reflects the lower traffic on business websites and Internet-based job agencies in the last three months.

No rate cut

Despite the slowdown in consumer confidence and the downtick in unemployment the Swiss National Bank (SNB)kept interest rates unchanged at its regular meeting.

The SNB said in a statement that interest rates should be held steady citing the already-easy monetary policy conditions in Switzerland and stressing its independence from the European Central Bank (ECB), which cut rates by half a point.

But given the clear signs that the Swiss economy is flagging, economists widely expet the SNB to cut the cost of borrowing soon, with the timing depending on the strength of the Swiss franc.

The Swiss central bank said it had effectively led the ECB in reducing rates so far this year and had loosened monetary conditions more freely that its Frankfurt neighbour in the wake of the September 11 attacks on US landmarks.

The SNB last cut its rate target by 50 basis points on September 24, citing the strength of the Swiss franc. Its target range for three month Swiss franc London Interbank Offered Rates (LIBOR) now stands at 1.75 to 2.75 per cent.

The euro has slipped below SFr1.4700 this week, still above the low of SFr1.4390 on September 21 that prompted the last Swiss rate cut.

swissinfo with agencies