Swiss consumer prices had their biggest annual drop in more than two years in December as the economy cooled and the franc’s ascent lowered import costs.
Consumer prices slipped 0.7 percent from a year ago, the Federal Statistics Office in Neuchatel said in an e-mailed statement today. That’s the third straight decline and the biggest decrease since October 2009. Economists forecast a drop of 0.6 percent, the median of 13 estimates in a Bloomberg News survey showed. In the month, prices fell 0.2 percent.
The Swiss franc strengthened to record levels against the euro and the dollar last year, increasing the threat of deflation. The central bank said last month it’s ready to take further measures if needed to counter deflation risks, when leaving borrowing costs at zero and maintaining its franc ceiling of 1.20 versus the euro introduced in September.
“The franc’s appreciation is taking its toll on Swiss companies which have to lower prices while witnessing shrinking margins,” said Ulrike Rondorf, an economist at Commerzbank AG in Frankfurt. “However, we don’t expect a period of outright deflation as we don’t see the economy slipping into recession.”
The franc was at 1.2185 versus the euro, the currency of Switzerland’s main trading partner, at 9:53 a.m. today. It had reached a record 1.0075 on Aug. 9, prompting the central bank to impose its cap the following month. Against the dollar, the franc was at 95.10 centimes.
Under a European Union harmonized method, Swiss consumer prices rose 0.3 percent in the month and declined 0.4 percent from a year earlier, today’s report showed. The cost of imported goods dropped 3.3 percent from a year ago, while domestic prices rose 0.2 percent.