Swiss consumer prices extended their longest slump in at least four decades in September as the franc’s strength continued to erode costs of imports.
Consumer prices declined 0.4 percent from a year ago after falling 0.5 percent in August, the Federal Statistics Office in Neuchatel said in an e-mailed statement today. That’s the 12th straight annual decline, the longest stretch since at least 1971, according to data compiled by Bloomberg. Prices rose 0.3 percent in the month.
Prices have continued to fall even after the Swiss National Bank imposed a franc ceiling of 1.20 versus the euro in September 2011 to fight deflation threats. While the Swiss currency has weakened about 1 percent in the past month, SNB Vice Chairman Jean-Pierre Danthine said on Sept. 20 “challenges of the strong franc haven’t yet been diffused.”
“Swiss deflation is moderating with the base effect of last year’s franc appreciation slowly fading out,” said Alessandro Bee, an economist at Bank Sarasin in Zurich, in an e-mailed note. “However, with stable oil prices and weak economic growth there are absolutely no signs that inflation could pick up in the near future.”
The cost of Swiss imported consumer goods dropped 1.7 percent from a year ago and were up 1.3 percent in the month, today’s report showed. Prices of domestic goods were little changed in the year and the month.
The Zurich-based SNB on Sept. 13 forecast Swiss consumer prices would drop 0.6 percent in 2012, before increasing 0.2 percent and 0.4 percent in the following two years. Any further strengthening of the franc would have a “serious impact” on the economy and price developments, it said on that day.
“The expected depreciation of the franc hasn’t yet materialized,” Danthine said on Sept. 20. “Based on this, it’s clear that the SNB will maintain its minimum exchange rate.”
Under a European Union harmonized method, Swiss consumer prices fell 0.3 percent from a year earlier. Prices increased 0.7 percent in the month.