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Swiss leading indicator hits 11-month high in July

Thursday, July 30, 2015 - 16:29

[ZURICH] Switzerland's leading economic indicator rebounded in July to an 11-month high from a 3-1/2-year low the previous month, the KOF research institute said on Thursday.

The rebound suggests Switzerland's export-reliant economy is getting to grips with the sharp strengthening of the Swiss franc since the central bank in January scrapped its policy of capping the currency as well as with the travails of the euro zone.

The indicator, which points to the strength of economic activity in half a year, rose to 99.8 points from a revised 89.8 in June, beating estimates for 90.3 in a Reuters poll.

This was the highest reading since August last year and brings the indicator closer to its long-term average of 100 points.

"The increase of the barometer to the long-term mean value does not yet mean that the Swiss economy is in 'normal mode'again," KOF economists said in a statement. "However, the KOF Barometer does indicate that the Swiss economy hopes to be able to come to terms with the first shock of the Swiss franc in the next few months."

The increase was largely based on brighter outlooks in prime costs, exporters' expectations and the manufacturing sector.

Switzerland's hotel and catering sector, one of the hardest hit by the stronger franc, was also less negative than in previous months, KOF said.

The June reading had originally been reported at 89.7, the lowest since December 2011.

Another economic think tank was less positive on Switzerland's economic outlook.

BAKBasel said retail sales, a key pillar for Switzerland's economy in both good and bad times, will likely remain weak due to the strong franc.

The group pointed to the trend of Swiss shoppers buying from neighbouring eurozone countries, foreign tourists being put off from buying in Switzerland and the weaker picture for Switzerland's economy.

Swiss retail sales fell 1.8 per cent in May in real terms versus the year-earlier month, the Federal Statistics Office said earlier this month.

REUTERS