27.08.201008:26:00UTC+00Swiss Economic Barometer Drops Again In August

Switzerland's KOF economic Institute said on Friday that its economic barometer declined for the second straight month in August. The fall in the index suggests that the economic growth will not accelerate in the next few months, yet will remain positive.

The KOF economic barometer fell to 2.18 points from July's revised 2.22. Meanwhile, economists had forecast a reading of 2.2. Citing the August leading index, the think tank said Switzerland's annual GDP growth is likely to remain positive throughout the next few months.

In the first quarter, the Swiss economy expanded 2.2% annually following 0.5% growth in the fourth quarter of 2009. The country's State Secretariat for Economic Affairs is due to release second quarter national accounts on September 2. It foresees Switzerland's economic growth to moderate to 1.6% in 2011 from an estimated 1.8% in 2010.

The KOF economic barometer is based on a multi-sectoral design with three modules. The core GDP module, which includes all sectors of the economy except construction and banking industries, is pointing downwards, though it has a moderately positive value. The core GDP module accounts for more than 90% of Swiss GDP and hence dominates the barometer.

Among the core GDP module components, the Swiss industry parameter is pointing more strongly downwards. The export destination EU parameter has fallen significantly, and is no longer in positive territory. However, the consumption? parameter has continued to improve and is now in positive territory.

The construction module has a moderately positive value, and continued to point upwards. Furthermore, the banking module is in positive territory, and is moving sideways.

"Today's KOF index should confirm that GDP growth could reach 1.9% this year," ING Bank economist Julien Manceaux said. Moreover, the economist said the index also supports the view that the Swiss National Bank will continue to unwind its exceptional monetary measures and begin to think about raising interest rates before the end of this year.

In its most recent monetary policy meeting in June, the central bank retained its key interest rate of 0.25% for a fifth time. The central forecast the Swiss GDP to rise 2% this year. The next SNB monetary policy meeting is due on September 16.

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