Moreover, even though the unemployment rate in October was slightly up, it's one of the lowest in Europe and below the natural rate of unemployment. So, the question here is what could be behind this advantage if Europe's eighth largest economy to avoid major slowdown?
We continue to believe that the impact of credit crunch is likely to be weaker in Switzerland because the country has a large current account surplus and a high savings rate which provides the country with enough reserves to sustain a major crisis. In addition, the deterioration of inflationary pressures has given recently a lot of room for monetary policy actions. In the last two months, in order to avoid the consumption drop, the Swiss National Bank has cut the 3-month target rate by 175bp. Yet, the Swiss economy is not completely immune to slowing growth in Europe and in the United States since the export sector of the Swiss economy constitutes over 50% of GDP. In fact, the recent appreciation of the Swiss franc against the euro is harming foreign sales of products such as machines and precision instruments.