Switzerland has a reputation as a “high-price island” but prices have actually slowly gone down for ten months in a row. In August, prices dropped by 1.4% from a year ago, the most in 56 years, an indication of deflationary pressure.
According to the Federal Statistical Office, the consumer price index fell by 0.2% in August 2015 compared with the previous month, reaching 97.6 points (December 2010 = 100).
This means that prices fell 1.4% from a year ago, the steepest year-on-year drop since 1959.
This trend started in 2014 but sharpened from January when the Swiss National Bank (SNB) removed its cap on the franc, set at 1.20 per euro.
The franc’s subsequent surge has lowered the price of imports from the eurozone. In August, the cost of overall imports fell by 5.5% year on year, the statistical office said. Cheaper oil has helped reduce prices.
In the retail sector the research consultancy BAK Basel predicts further price reductions to kick in over the coming months, and the SNB has said it expects prices to fall this year and in 2016.
However, BAK Basel expects retail turnover in Switzerland to fall by 2.1% this year compared with 2014 – the steepest decline in retail sales in 35 years – as internal demand wanes due to a rise in cross-border shopping, fewer tourists and the general economic slowdown.
To remain competitive and to pass on exchange rate gains, supermarket giants Coop and Migros say they have negotiated hard with eurozone suppliers to reduce the prices of thousands of items on their shelves since January. Coop spokesman Ramon Gander said “extensive reductions” on over 14,000 products are worth CHF170 million ($175 million).
But a recent report by swissinfo.ch found that few people seemed to notice the lower prices in Switzerland.
What’s more, according to a survey in August by the State Secretariat for Economic Affairs (SECO), Switzerland’s long-term economic situation, unemployment and the high cost of living seem to be eating away at consumer confidence, which is nearing a four-year low.
swissinfo.ch with agencies