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Swiss Consumer Prices Continue Slump in October on Franc

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Nov. 7 (Bloomberg) -- Swiss consumer prices extended their longest slump in at least four decades in October as the franc’s strength continued to erode costs of imports.

Prices declined 0.2 percent from a year ago after falling 0.4 percent in September, the Federal Statistics Office in Neuchatel said in an e-mailed statement today. That’s the 13th straight annual decline, the longest stretch since at least 1971, according to data compiled by Bloomberg. Prices rose 0.1 percent in the month. Both yearly and monthly figures were in line with the median of 12 and 11 economist estimates, respectively, in a Bloomberg News survey.

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 since the European Central Bank pledged in August to purchase government bonds of distressed nations, SNB President Thomas Jordan said last week the franc remains “very strong.”

“The Swiss franc is massively overvalued despite the recent intervention from the SNB,” Ursina Kubli, an economist at Bank Sarasin in Zurich, wrote in a note to clients yesterday. “The franc is set to remain overvalued given the remaining risks of the euro crisis.”

Imported Goods

The franc was little changed at 1.20795 per euro, and rose 0.3 percent against the U.S. dollar, trading at 94.04 centimes per dollar at 9:31 a.m. in Zurich.

The cost of Swiss imported consumer goods dropped 1.2 percent from a year ago and rose 0.5 percent in the month, today’s report showed. Prices of domestic goods were up 0.1 in the year and unchanged in the month.

The 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 that day.

“The current strength of the Swiss franc is not due to economic fundamentals, but the fears of financial markets that reinforce its position as a safe haven,” Jordan said last week.

Under a European Union harmonized method, Swiss consumer prices fell 0.1 percent from a year earlier. Prices increased 0.1 percent in the month.

To contact the reporter on this story: Zoe Schneeweiss in Zurich at zschneeweiss@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net