- IHS in Frankfurt
Swiss producer and import prices decreased for the twentieth consecutive month in May, falling by 6% on the annual basis, posting worse than an expected decline of 2.1% and following the drop of 5.2% in the prior month. The prices in Switzerland have been falling since October 2013. The index, calculated month-on-month, slowed to 0.8% from 2.1% in April, while economists forecasted a rise of 0.1%. In the meantime, another economic report coming from Switzerland showed the Swiss retail sales rebounded to a growth of 1.6% in April, considerably up from a fall of 2.4% in the previous month.
The Swiss economy is facing threat of its first recession in six years and the Swiss National Bank is now in focus, as the SNB's governor has still some power left to cut interest rate. The deposit rate is already at a record low of -0.75% and a further reduction could risk a run on cash that the SNB would like to avoid. The economy contracted 0.2% in the first quarter of the year and analysts predict another drop of GDP this quarter that would bring the first recession in the economy since 2009. However, the borrowing rate at -0.75% seems to be the lower bound and the SNB is waiting to assess the effect. The regulator announces its decision on interest rates this Thursday and it will come with new growth and inflation projections.
© Dukascopy Bank SA