ZURICH, April 26 (Reuters) - Growth in Swiss exports slowed
in March but remained relatively buoyant as the country's
manufacturers adjusted to a soaring Swiss franc, while domestic
consumption picked up, data showed on Tuesday.
Powered mainly by bouts of risk aversion, the franc has risen to record highs against both the dollar and the euro in recent months, increasing the price of Swiss goods for buyers abroad.
But while slowing from the two previous months, the rate of export growth still reached 7.2 percent year on year in real terms, the Federal Customs Office said.
'The export industry has resisted (the rising franc) well so far but the question is how long this is going to last,' Credit Suisse economist Fabian Heller said.
'Swiss exporters have also reacted by lowering prices. This means that the strong franc has an impact not only on demand but also on exporters' margins.'
In the first quarter, exports rose 12.3 percent, with the watches, metals, machine and electronics industries the big gainers.
Domestic conditions in Switzerland are regarded by many economists as ripe for an interest rate rise, given low joblessness, a booming real estate market and consumers willing to spend.
The UBS Swiss consumption indicator, also published on Tuesday, rose to 1.66 in March, a gain of 0.21 points over the previous month.
But the Swiss National Bank, which expects overall output growth of around 2 percent this year, has so far shied away from tightening to avoid boosting the already strong franc, which it has called an 'extraordinary burden' on Swiss exporters.
'We expect the Swiss National Bank to raise rates at the end of the year but that depends on the franc development,' Heller said. 'So far rate hikes in the euro zone have not weakened the franc but if that happens the SNB may raise rates earlier.'
Interest rate futures fully price in a rate hike of 25 basis points by the SNB in December, with some chance of a move in September.
The SNB kept its target for the 3-month franc LIBOR unchanged at 0.25 percent at its most recent policy review in March despite a brighter picture for the economy overall, citing risks from the European debt crisis and the Japanese earthquake.
The European Central Bank's interest rate rise on April 7 has opened the way for the SNB to tighten too by taking some pressure off the strong franc.
The dollar hit a record low versus the Swiss franc at 0.8770 francs at 0749 GMT on Tuesday on the EBS trading platform, while the euro dropped to a session low of around 1.2810 francs.
(Reporting by Catherine Bosley and Silke Koltrowitz; Editing by John Stonestreet) Keywords: SWISS ECONOMY/ (catherine.bosley@thomsonreuters.com; +41 58 306 7461) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Powered mainly by bouts of risk aversion, the franc has risen to record highs against both the dollar and the euro in recent months, increasing the price of Swiss goods for buyers abroad.
But while slowing from the two previous months, the rate of export growth still reached 7.2 percent year on year in real terms, the Federal Customs Office said.
'The export industry has resisted (the rising franc) well so far but the question is how long this is going to last,' Credit Suisse economist Fabian Heller said.
'Swiss exporters have also reacted by lowering prices. This means that the strong franc has an impact not only on demand but also on exporters' margins.'
In the first quarter, exports rose 12.3 percent, with the watches, metals, machine and electronics industries the big gainers.
Domestic conditions in Switzerland are regarded by many economists as ripe for an interest rate rise, given low joblessness, a booming real estate market and consumers willing to spend.
The UBS Swiss consumption indicator, also published on Tuesday, rose to 1.66 in March, a gain of 0.21 points over the previous month.
But the Swiss National Bank, which expects overall output growth of around 2 percent this year, has so far shied away from tightening to avoid boosting the already strong franc, which it has called an 'extraordinary burden' on Swiss exporters.
'We expect the Swiss National Bank to raise rates at the end of the year but that depends on the franc development,' Heller said. 'So far rate hikes in the euro zone have not weakened the franc but if that happens the SNB may raise rates earlier.'
Interest rate futures fully price in a rate hike of 25 basis points by the SNB in December, with some chance of a move in September.
The SNB kept its target for the 3-month franc LIBOR unchanged at 0.25 percent at its most recent policy review in March despite a brighter picture for the economy overall, citing risks from the European debt crisis and the Japanese earthquake.
The European Central Bank's interest rate rise on April 7 has opened the way for the SNB to tighten too by taking some pressure off the strong franc.
The dollar hit a record low versus the Swiss franc at 0.8770 francs at 0749 GMT on Tuesday on the EBS trading platform, while the euro dropped to a session low of around 1.2810 francs.
(Reporting by Catherine Bosley and Silke Koltrowitz; Editing by John Stonestreet) Keywords: SWISS ECONOMY/ (catherine.bosley@thomsonreuters.com; +41 58 306 7461) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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