Consumer spending boosts Swiss economy

Consumers are prepared to spend again Keystone Archive

The Swiss economy is growing faster than at any point in the past five-and-a-half years, boosted by strong consumer spending.

This content was published on December 1, 2005 - 16:23

Switzerland's gross domestic product (GDP) has gained one per cent during the past quarter, and should increase by 1.7 per cent this year - more than most economists had forecast.

Switzerland's State Secretariat for Economic Affairs (Seco) said on Thursday that economic growth was 2.3 per cent for the year ending in September.

The economy grew faster than expected in the third quarter of 2005. Economists polled by the Reuters news agency had forecast GDP growth of up to 0.9 per cent for the July to September period.

"At first glance, this looks surprisingly positive," said Astrid Frey of Bank Sarasin. "We had not expected such an acceleration."

For Frey the outlook is positive and that the growth recorded in the third quarter confirms the Swiss National Bank's own optimistic outlook.

GDP growth was 0.4 per cent in the first quarter and in the second quarter 0.6 per cent.

Private consumption rose 0.7 per cent from the second quarter, while capital investments fell 2.8 per cent, exports were slightly higher and imports remained at the same level.

Consumer spending

Analyst Klaus Papenbrock of Deutsche Bank said an economic improvement was in place, thanks mainly to strong consumer demand. But he warned that the economy's health remained dependent on the euro zone.

"Switzerland's wellbeing is always dependent on how its neighbours are faring, but for now the euro zone is looking good," he added.

Looking ahead, Seco forecast that the economy would continue to grow, although this would require more input from capital investment and the labour market. Inflation will remain moderate, it said.

Most banking analysts and economic institutes have reacted positively to the latest figures and increased their own growth forecasts for this year. They now expect the economy to grow by 1.7 per cent and not 1.3 or 1.4 per cent as believed earlier.

None of the experts fear a slowdown during the fourth quarter and they predict that falling petrol prices could further boost consumer spending during the Christmas period.

Earlier this week, the Organisation for Economic Development (OECD) said Switzerland's economy would grow by 1.25 per cent this year, and "should accelerate in 2006".

In its autumn report for the world economy, the OECD said that exports and investment would boost Swiss output without fuelling inflation. It added that the improved economic situation would also improve the Swiss job market and encourage consumption.

swissinfo with agencies

Key facts

Seco expects the Swiss economy to grow 1.7%, up from its previous forecast of 1.3%.
Earlier this week, the OECD forecast an annual growth rate of 1.25% for Switzerland.
Other forecasts for this year's growth: Institute for Business Cycle Research - 1.7%; Basel Economics - 1.2%; Créa Institute - 1.5%.

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