Switzerland’s economy expanded at a faster pace than economists forecast in the second quarter as companies stepped up spending to meet global demand.
Gross domestic product rose 0.9 percent from the first quarter, when it increased 1 percent, the State Secretariat for Economic Affairs in Bern said today. Economists forecast a 0.8 percent gain, the median of 18 estimates in a Bloomberg News survey showed. Gross fixed capital spending jumped 2.1 percent from the first quarter, when it dropped 2.2 percent. Exports growth slowed to 1.7 percent from 3.7 percent.
Switzerland’s recovery may lose some momentum as a global slowdown threatens to hurt exports just as a stronger franc makes goods less competitive abroad. Leading economic indicators fell for a second month in August and central bank President Philipp Hildebrand said on Aug. 21 he expects a “weaker” economic momentum in the second half of 2010.
“This is a solid and broadly based expansion,” said Alexander Koch, an economist at Unicredit Group in Munich. “Switzerland’s economy is in good shape. Still, a faltering global economy will show an impact on exports.”
The franc appreciated against the euro after the report, trading as high as 1.2959. The Swiss currency was at 1.2971 at 8:28 a.m. in Zurich, up from 1.3011 yesterday.
In the year, Swiss GDP increased 3.4 percent after rising 2.3 percent in the first quarter, today’s report showed. Imports surged 4.6 percent from the previous three months, when they increased 2.1 percent. Consumer spending was unchanged after rising 0.7 percent in the first quarter and construction spending increased 1.3 percent.
Reviving global demand also helped fuel an expansion in neighboring Germany, Switzerland’s largest export market. German GDP rose 2.2 percent in the second quarter, the biggest increase in two decades. The 16-member euro-region economy expanded 1 percent over that period.
Swatch Group AG, the maker of Omega timepieces, said on Aug. 4 that it expects “strong” sales and profit in the second half of the year. The company’s first-half profit jumped 55 percent on reviving demand for luxury goods.
With exports accounting for more than half of Swiss GDP, the Swiss National Bank was forced to add billions of euros to its balance sheet in the 15 months through June to weaken the franc. The Zurich-based central bank on June 17 raised its economic forecast for this year to 2 percent from around 1.5 percent and said it won’t counter currency gains anymore.
The Swiss currency has since appreciated 6.9 percent against the euro, reaching a record 1.2852 on Aug. 31. The franc also strengthened versus the dollar over the past two months partly on signs a U.S. recovery is losing steam.
Kudelski SA, the world’s largest maker of security cards for pay televisions, said on Aug. 24 that the weakness of the dollar and euro against will weigh on sales and profit. Albert Baehny, chief executive officer of Geberit AG, Europe’s biggest maker of toilet-flushing systems, said on Aug. 12 that he only expects “slightly better market conditions” in 2011.
The SNB has signaled that it’s in no rush to raise borrowing costs from 0.25 percent. Hildebrand told Tages- Anzeiger newspaper in an interview published on Aug. 21 that economic uncertainties have “increased somewhat” since the June policy meeting.
SNB policy makers will hold their next rate assessment on Sept. 16 in Zurich. The government will publish its latest economic projections on Sept. 21.
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