A surprising upswing in consumer confidence may be premature given the steadily rising unemployment rate and gloomy company forecasts, economists believe.
Swiss shoppers have a healthier appetite for spending than in the summer, according to a government pulse check of consumer intentions. Retailers are more optimistic than any other sector in a separate survey.
All of this flies in the face of official jobless figures, released on Friday, that showed the rate of unemployment had climbed to a five-year high of four per cent by the end of October. There is widespread belief that this trend could continue well into 2010.
Consumer confidence still remains in negative territory according to the State Secretariat for Economic Affairs (Seco). But the latest survey shows a marked improvement in the outlook of potential shoppers since the last check in July.
Alessandro Bee, an economist at Bank Sarasin, believes consumers may be reacting prematurely to recent positive economic news that the recession is at the beginning of the end.
"Once people realise that the upswing they see in the newspapers does not filter through to their wages and to the labour market situation they will probably be disappointed," he told swissinfo.ch.
High street happy
Bee predicted a slowdown in domestic consumer consumption in the next three months, that could last well into next year as job cuts hit home.
A survey of small and medium-sized enterprises (SMEs), conducted by the UBS bank and the Swiss Industry and Trade Association, showed many smaller companies are still contemplating job cuts.
High street shops, however, have a much brighter outlook than manufacturing, construction and service sector companies.
"Despite continuing price pressure, the revenue situation for SMEs in the retail sector once again improved in the third quarter – contrary to expectations. This sector also does not expect business to slump any further in the fourth quarter; cash flow and revenues should, however, remain clearly below their 2008 levels," the report stated.
Retail figures only showed a slight slump in August when compared with the same month last year, as opposed to a positive trend in June and July.
Yes, no, maybe
Domestic consumption has held up relatively well compared with other countries, and this – along with a stable real estate market – has helped Switzerland stave off the worst of the global recession. But creeping unemployment has led to many observers fearing that consumer spending cannot last.
Bee believes that Switzerland will be led out of recession by its export driven industries as opposed to local shoppers. "Exports are picking up right now and we will see strong growth in the next three quarters," he said.
There will, however, be a time lag between the fortunes of industry and consumers as recruitment will not start again in earnest until profits and orders show sustainable improvement.
Former United States President Bill Clinton, on a visit to Switzerland this week, summed up his answer to the question of whether the recession has ended as: "yes, no, maybe".
"Yes we are out of it if you teach economics, because the definition is two consecutive quarters of economic growth. 'No we are not' if you are a real person because employment hasn't picked up again," he said in St Gallen.
The "maybe" refers to future unseen shocks that have shadowed previous economic downturns.
Matthew Allen, swissinfo.ch
The violent lurches in the Swiss and global economies in the last year have kept economists on their toes trying to predict what will happen next.
The latest gross domestic product (GDP) forecasts show the Swiss Economic Institute predicting -3,4% for 2009 against a more optimistic Seco estimation of -1.7%.
The rate of unemployment in Switzerland currently stands at 4%, but most observers agree it could reach 6% before the round of firing abates.
The price of goods has fallen as a result of declining economic activity, with a basket of products costing 0.8% less in October than it did a year ago.
However, economists put this down to the lowering of oil prices and the influence of seasonal factors. Core inflation is expected to end the year at around 0.5%.