Switzerland faces deflation risks, as consumer prices fall in September

The Swiss National Bank may act soon, as consumer prices in Switzerland declined from the previous year for the first time in seven months in September, affected by a decline in the costs of imports and falling oil prices. Consumer prices slid 0.1%, the Federal Statistics Office reported, the first negative reading since February. On a monthly basis, however, cost of living was 0.1% higher compared with the prior month. Deflationary pressure came from overseas, with the price of goods imported by Switzerland dropping by 1.2% compared to the same period last year, while domestic goods prices posted a modest growth of 0.3%. A sharp decline in oil prices also impacted Swiss price growth, with Brent crude oil falling by 8.3% in September, the biggest monthly drop since May 2012. The Swiss economy is facing a deflation threat, with the SNB projecting the Consumer Price Index to report no growth in the third quarter before rising 0.2% in the October-December quarter. Moreover, the central bank does not see inflation accelerating during 2015 and 2016, with analysts expecting the bank will intervene into the forex market if the Swiss Franc rises sharply.  

Separately, Swiss retail sales rose 1.9% in August in real terms from the last year, the Federal Statistics Office said. Sales increased 2.3% compared to the previous month when adjusted for seasonal effects.