Swiss Second-Quarter Growth Accelerates

Switzerland's economic expansion unexpectedly accelerated in the second quarter and inflation eased last month, reinforcing the case for the central bank to keep interest rates unchanged.

Gross domestic product, the value of all goods and services, rose 0.4 percent from the first quarter, when it increased 0.3 percent, the State Secretariat for Economic Affairs in Bern said today. August inflation unexpectedly slowed to 2.9 percent from 3.1 percent.

Growth in emerging markets including India and China is fueling demand for exports like power networks and machinery while the lowest unemployment in six years is boosting Swiss spending. Swiss exporters may see sales growth evaporate as the economies of the country's main trading partners cool. The 15-nation euro-area economy shrank in the second quarter and its manufacturing and service industries contracted in August.

The Swiss National Bank kept its key rate at a six-year high in June as it balanced risks to growth and inflation. At 2.75 percent, Switzerland's benchmark rate is the third lowest among major economies after Japan's 0.5 percent and the U.S.'s 2 percent. The SNB holds its next monetary policy meeting Sept. 18.

Consumer prices fell 0.3 percent from July and core inflation, which excludes food, tobacco, fuel and seasonal products, rose 1.4 percent from a year earlier and increased 0.2 percent from June. From the second quarter of last year, the economy grew at a rate of 2.3 percent, down from 3 percent in the previous three months, today's report showed.

Slower growth and the 20 percent drop in the cost of oil from a record $147.27 a barrel on July 11 may ease price pressures. Swiss leading economic indicators declined to the lowest in five years in August and a consumption indicator fell to the lowest since December 2006.

Investment contracted by 0.7 percent in the second quarter after growing the first three months of the year, today's report showed. Equipment purchases fell by 0.9 percent from the previous quarter while construction declined 0.3 percent.

Company spending on construction slid 0.5 percent from the first quarter, when it decreased 0.3 percent, today's report showed. Imports rose 3.8 percent from the previous quarter, when they declined 3 percent. Exports grew 3.6 percent and consumption expanded by 0.7 percent.

In the year, the economy will probably grow between 1.5 percent and 2 percent after expanding 3.3 percent last year, the central bank forecasts.

Swiss Second-Quarter Growth Accelerates,
9/2/2008 4:54:24 AM