The Swiss economy unexpectedly regained some momentum in the second quarter as solid consumer spending and robust exports outweighed a drop in company investment, data showed on Tuesday.

Inflation eased to 2.9 percent in August from a 15-year high in the previous month on lower oil prices, but core inflation hit the highest level in over 12 years, limiting the Swiss National Bank’s leeway to cut interest rates soon.
Swiss gross domestic product grew 0.4 percent in the second quarter compared with the first, the State Secretariat for Economic Affairs (Seco) said. GDP rose 2.3 percent compared with the second quarter of last year.
Economists surveyed by Reuters had expected a slowdown in quarterly second-quarter GDP growth to 0.2 percent from 0.3 percent in the first three months of the year and an annual inflation rate for August of 3.1 percent.
Consumption rose 0.6 percent on the quarter as low unemployment and rising wages boosted consumers’ spending power while exports increased by 3.6 percent despite the slowdown in key Swiss export markets.
“The breakdown confirms that Swiss domestic demand remained very strong, in contrast to euro zone neighbors, which saw a contraction in GDP in Q2,” said 4Cast analyst Saara Tuuli.
The Seco said manufacturers, hotels, restaurants, retailers and the public service sector increased output in the quarter.
Banks and insurers, however, suffered from the financial market turmoil, slipping into recession as output from the financial services sector fell for a second quarter running.
Swiss bank UBS is one of the main victims of the credit crisis and other banks and insurers are also feeling the pinch of the financial market turmoil which weighs on profits.
The specialization of Swiss exporters on high-end products such as luxury watches, chocolate or machinery for the oil and energy sector shielded the Alpine economy against some of the global economic slowdown.
But signs of a more severe cooling in the months to come are mounting with the KOF growth barometer at a five year low and consumer mood also at its worst since the recession in 2003.
Companies have already started to cut back investment spending in the second quarter, the data showed.
“The fall in investments is a reason to worry. It does not bode well for the future,” said Sarasin analyst Jan Poser.
CORE INFLATION Swiss consumer prices fell 0.3 percent in August compared with July and were 2.9 percent higher than a year ago, the Federal Statistics Office said in a separate release.
“Oil prices pushed inflation down in August,” Poser said. “Inflation has obviously peaked.”
However, core inflation excluding food, tobacco, beverages, energy and seasonal products as well as administered prices rose to an annual 1.9 percent, the highest rate since January 1996.
“At the moment, inflation is not a problem for the market,” ZKB analyst David Marmet said. “But it could be that inflation becomes an issue in the coming months.”
The SNB has already indicated that it is likely to hold its target rate for the 3-month Swiss franc LIBOR unchanged at 2.75 percent at its policy meeting on Sept 18 for a fourth quarter running.
SNB Chairman Jean-Pierre Roth said in a recent newspaper interview the central bank still expected inflation to ease over the coming months as oil and commodity prices have stabilized.
(Source: telegraph.co.uk)