Downbeat consumers hit by rising prices

Heating oil has become more expensive Keystone Archive

Swiss households are having to contend with higher prices at a time when they are increasingly pessimistic about the prospects for the global economy.

Consumer prices rose sharply in October as inflation hit an 18-month high of 1.3 per cent.

The Federal Statistics Office said the rise in inflation was mainly due to increases in the cost of clothes as well as higher heating-oil prices.

The figures, released on Thursday, showed that inflation was 0.9 per cent higher in October than it was the previous month.

According to the Statistics Office, the annual average rise in prices should stabilise at between 0.8 and 0.9 per cent.

The figures were largely in line with economists’ predictions of between 0.8 and 1.3 per cent year-on-year, with a median value of 1.1 per cent.

“The progression of the price index for October 2004 can be principally explained by the increase observed in clothes and shoes (15.1 per cent) and by a large increase in the price of heating oil,” said the Statistics Office in a statement.

Heating-oil prices rose by over 17 per cent last month, and they are now almost 40 per cent higher than a year ago.

Higher than expected

“[Inflation] is a little higher than expected,” said analyst Thomas Trauth of Credit Suisse First Boston. “The clothing effect always happens as prices are marked up after the summer sales. The other main factor is rising oil prices.”

The Statistics Office has factored in high oil prices in its prediction of a 1.3 per cent overall rise in inflation for 2005.

“This estimation is based on a hypothesis of solid economic growth and continuing moderate interest rates,” said the Statistics Office.

“Strong fluctuations in the prices of petrol products are the only factor that could belie these predictions.”

Officials said, however, that core inflation, which strips out volatile food, drink and energy prices, was 0.8 per cent month-on-month and 0.6 per cent year-on-year.

Consumers

Also on Thursday the State Secretariat for Economic Affairs (Seco) released its consumer confidence figures for October, which remained practically stable.

The Swiss consumer sentiment index, which is released quarterly, was at –13 points in October compared with –12 points in July.

But the index, compiled from a survey of more than 1,000 households, revealed that people were more pessimistic about the prospects for the economy as a whole.

“[October’s figure] essentially arises due to a pessimistic view of the general economic picture, which is offset by a more favourable assessment of their own financial situation,” said Seco in a statement.

The figures come shortly after the Swiss economics ministry cut its growth target for the economy to 2.0 from 2.3 per cent. It said the revised figures were the result of a surge in the price of oil and a global slowdown.

These forecasts are in line with those of other leading economic experts, ranging from 1.6 to 1.9 per cent.

swissinfo with agencies

Key facts

Swiss consumer prices were 1.3 per cent higher in October than a year ago.
Inflation was 0.9 per cent higher in October than it was last month.
The annual average rise in prices should stabilise at between 0.8 per cent and 0.9 per cent.
A 1.3 per cent overall rise in inflation is predicted for 2005.