Forex News – Swiss GDP falls in third quarter due to strong franc

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Forex News: Swiss Franc makes a new record high against EuroSwiss gross domestic product data were released today for the third quarter, signalling slowing growth in Switzerland primarily due to a strong currency.

GDP grew only 0.2 percent for the months July to September. Though marginally higher than a 0.1 percent forecast, growth was much lower than the second quarter which posted a 0.5 percent growth after being revised up.

On an annualized basis growth increased 1.3 percent from a year earlier which was lower than expectations of a 1.7 year-on-year growth rate.

A report from the State Secretariat for Economics (SECO) shows that Swiss exports declined due to an expensive Swiss franc and also data indicates that capital investment fell, particularly in the metal working and mechanical engineering sectors.

The Swiss National Bank has persistently warned the strong franc will hamper growth. Forward-looking indicators such as the KOF economic barometer are pointing to a severe slowdown. The KOF index was released yesterday which fell to its worst level since August 2009. The index declined to 0.35 in November from 0.8, worse than forecasts for 0.63. The data give evidence that the Swiss economy cannot escape the European growth slowdown.

On September 6, the Swiss National Bank set a cap of 1.20 per euro on the franc, citing a heightened risk of deflation and recession due to a strong franc.

The Swiss unit has since weakened slightly but the SNB still thinks it is overvalued.