Swiss economy accelerates in Q3 for manufacturing

7 years ago - Published in Finance, Fundamental Analysis

Switzerland's economy grew 1.2 percent year-on-year in the third quarter, accelerating sharply from the weak second quarter as manufacturing and exports picked up.

Switzerland’s gross domestic product rose 0.6 per cent quarter on quarter in the three months to the end of September, according to the State Secretariat for Economic Affairs. That was in line with a median estimate compiled by Reuters of 0.6 per cent. GDP growth for the second quarter was also revised up to 0.4 per cent from 0.3 per cent.
 

“It’s finally a decent result that fits better to the upbeat sentiment we’ve seen,” said Alexander Koch, an economist at Raiffeisen Schweiz, adding that the components data showed momentum was becoming more broad based.

“At the moment, the recovery is very much driven the strong export dynamics, but with the solid global economy and the increasing utilization of capacity, the recovery on the export side should boost the domestic economy as well,” Koch said.

Exports are also getting help from the weaker franc, which has fallen some 8 percent against the euro this year, revised higher from the 0.3 percent originally reported, its slowest annual rate in nearly eight years.

The third-quarter growth easily beat the average estimate of 0.9 percent in a Reuters poll of economists, according to Thomson Reuters data.

The Swiss government in September cut its 2017 growth estimate to 0.9 percent. It forecast 2 percent expansion in 2018.

"Investments are playing an increasingly important role. That is good news because it can lead to a recovery that will accelerate without external input," VP Bank said in a note.

"Today's growth rates are a pre-Christmas present for the SNB. The franc does no longer weigh on the Swiss economy," the bank's economists said.

The economy has been gradually recovering since the Swiss National Bank (SNB) abandoned its 1.20 floor for the franc versus the euro nearly three years ago, sending the safe-haven franc soaring against the currency of its main export market.

SNB board member Fritz Zurbruegg said on Wednesday that the franc remained susceptible to safe-haven pressure, adding the central bank was still ready to intervene to stem upward pressure on the currency. The SNB, which has been using negative interest rates and currency intervention to rein in the franc, holds its next quarterly policy meeting on Dec. 14.