Don’t expect optimism from the SNB
  • Don’t expect optimism from the SNB

    Sergei Glushkov
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    Swiss national bankThis week, on the 14th of March, on Thursday meeting of the Management Committee of the Swiss national Bank (SNB) will be held. On the agenda there are not only monetary policy issues, but also publication of renewed economic growth forecast for 2013.

    Analysts were surprised at high temp of economic growth of Switzerland in the fourth quarter. Everybody used to complains of Swiss government about high exchange rate of national currency which put strokes in the wheels of national exporters. But – here is surprise! – in spite of discomfort for the country exchange rate of franc, the Swiss GDP accelerated tempo to +1.4% y/y in the last three months of 2013, when only  +1.0% y/y  was expected by forecast,  and growth by 1.2% y/y in the third quarter. And according to quarter statistics the Swiss economic growth slowed down in the fourth quarter from +0.6% q/q to +0.2% q/q, but it also surpassed experts’ consensus-forecasts (+0.1% q/q).

    I remind that the dynamics of euro zone GDP, which is the main trade partner of Switzerland, zws negative in the last quarter in 2012 (-0.9% y/y, -0.6% q/q).

    Success of Switzerland in October-December 2013 are explained by simultaneous growth in private and government spendings: both of them increased by 1.1% q/q for this period of time. And there are doubts concerning the same tempo of Swiss economic growth for the first quarter of the current year. In any case, a lot of signs put us on our guard. In February Swiss PMI, business activity index, decreased from January level 52.5 to 50.8, it didn’t hold out to forecasted level of 52.4 considerably. So, though the index has managed to hold in “green” zone, higher than the level of 50.0, tempo of activity growth become much lower. And leading indicator KOF decreased for fifth successive time in February. .

    I think that leaders of the SNB will not ignore these signs at the forthcoming meeting and maybe it will be forced to lower its GDP forecast for 2013 (for the present the Central Bank forecasts growth to be at the level of  1.0 – 1.5% y/y). In any case, we will undoubtedly hear about positive risks,  fragile economic recovery , the necessity of the mild monetary policy, overstated frank and necessity of keeping EURCHF at the level of 1.20 unchanged. Switzerland has no choice: in spite of all efforts of the government, inflation in the country remains under zero level (-0.3% y/y according to the data for February). Restrained mood of the SNB might be additional stimulus for further decrease of franc against American dollar.

     

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