Euro Crisis Has Affected Germany; Switzerland Still Immune
George Dorgan | Nov 26, 2012 03:10AM ET
Both Swiss and German economic indicators show continued signs of stability, but the German situation has become worse and might affect the Swiss.
Especially low unemployment, rising real wages and strong trade balances are signs of robustness.
Despite that, Germany’s industrial production is weaker than last year, the strong growth of 2011 has finished. Switzerland sees higher increases in real wages. Thanks to higher incomes and lower prices, Swiss retail sales rose by 5.9% on a yearly basis, but fell by 0.8% in Germany. Construction is now slowing in both Switzerland and Germany.
The Swiss “KOF leading indicators” have risen from 0.01 in Q4/2011 to 1.67 now, but are situated still under the value of 2.23 from June last year. The leading German indicator, the “IFO business expectations” stands at 93.2 and is clearly behind last year’s June value of 106.3 and smaller than the October 2011 value of 97.0.
Possibly thanks to lower inflation and higher wages, the German GfK consumer climate is ticking higher than last year; maybe finally time for retail sales to edge up.
Purchasing manager indices (PMI) for the manufacturing industry in both Germany and Switzerland are far lower than in 2011, as the Southern European and Chinese demand for cars, machines and equipment has fallen. The latest see seasonal effects in detail ). By then the PPI might have risen over 1%: quite a big figure for Switzerland. With the crawling peg, the central bank might lower the minimum rate for the EUR/CHF to 1.15 for 2013, and promise another decrease to 1.10 in2014. A stronger franc will help the central bank to tame prices of imported goods, which make up 27% of the Swiss CPI.
Many like Jim Rogers or Marc Faber are expecting a global depression. In this case the SNB will continue to enforce the peg with the risk that the central bank’s later losses are even bigger.
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