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Swiss Economy Unexpectedly Stalls on Weak Domestic Demand

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Swiss Franc
  • Swiss Economy Unexpectedly Stalls on Weak Domestic Demand

Switzerland’s economy failed to grow for the first time in more than a year in the third quarter, held back by weak domestic demand and the first fall in government spending since early 2014.

The stagnation followed expansion of 0.6 percent in the three months through June, and fell short of the 0.3 percent growth forecast by economists in a Bloomberg survey. The statistics office said the weak performance wasn’t a sign of the recovery being thrown off course.

“This surprisingly slow growth is not mainly due to the strong franc, but due to a few special factors — for example, there was no growth impulse from the health care sector which is unusual,” Ronald Indergand, head of the economics department at the SECO, said by telephone. “We believe that the quarter is an outlier and that the recovery of the economy from the strong franc isn’t in jeopardy.”

Switzerland’s growth has long been plagued by the strength of its currency, which the central bank says is “overvalued” and occasionally tries to tame with market interventions. While the recovery in the euro area — Switzerland’s biggest market — is chugging along, political uncertainty linked to elections across the region next year could undermine demand there.

“The surprise for us was the weak domestic situation,” Indergand said. “Manufacturing was relatively solid, and other sectors such as the tourism industry that have been under pressure due to the strong franc didn’t fare so poorly either.”

Contributing Factors

Exports of goods relevant to the real economy increased 1.2 percent in the quarter, thanks to strong foreign demand for pharmaceuticals, according to the SECO. Exports of services contracted 0.8 percent, and when factoring in imports of both goods and services, that resulted in a negative trade balance.

Swiss household spending rose just 0.1 percent, while investment in equipment increased 0.5 percent, the SECO said. Government consumption declined 0.1 percent.

Recent economic gauges have indicated that economic growth is on track. A closely watched index of manufacturing activity touched its highest in nearly three years in November. Output increased for a 14th month and the backlog of orders rose markedly.

The Swiss National Bank, which caused the surge in the franc last year when it gave up its minimum exchange rate, will issue its first take on growth in 2017 at its policy assessment on Dec. 15. It’s most recent forecast, issued in September, was for growth of approximately 1.5 percent in 2016. The SECO, which will also update its projections on Dec. 15, predicts an expansion of 1.8 percent in 2017.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Naira

Daily Naira Exchange Rates; Thursday, May 6, 2021

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Naira Exchange Rates - Investors King

Naira depreciated further at the parallel market on Thursday as the local currency traded at N485 to a United States Dollar. The Nigerian Naira exchanged at N676 to a British Pound and N585 to a Euro as shown below.

Naira Black Market Exchange Rates

Morning * Midday** Evening *** Final Rates

Date USD GBP EURO YUAN Canadian Australian
NGN BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL BUY/SELL
06/05/2021 480/485 665/676 575/585 62/69 395/405 292/320

Bureau De Change Naira Rates

Date

USD

GBP

EURO

NGN

BUY/SELL

BUY/SELL

BUY/SELL

06/05/2021

475/482

663/676

575/587

06/05/2021

475/482

663/676

575/587

Central Bank of Nigeria’s Official Naira Rates

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Forex

CBN Extends N5/$ Incentive Period to Boost Dollar Inflow

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Godwin Emefiele - Investors King

The Central Bank of Nigeria (CBN) has extended the N5 per US Dollar incentive on forex remittance indefinitely to boost liquidity and further deepen economic recovery.

The initiative was scheduled to end on May 8. It was introduced to encourage recipients of dollars to use formal banking channels and help the central bank capture such inflows to boost the stability of the local currency, which has been under pressure after oil prices plunged last year.

“We hereby announce the continuation of the scheme until further notice,” the regulator said in a statement on its website on Thursday.

The naira has been devalued three times since last year after a sharp drop in oil earnings, which accounts for 90% of foreign-exchange inflows, and remittances from workers abroad led to a dollar crunch in the West African nation, which produces the most crude in Africa. The local unit traded for 410.31 on the investors and exporters window, also called Nafex, as of 8:51 a.m. in Lagos.

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US Dollar

Dollar Falls as Risk Appetite Improves, Sterling Dips on BoE

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US Dollar - Investorsking.com

The dollar dropped to its lowest point in three days on Thursday as global market risk appetite improved, while sterling zig-zagged after the Bank of England slowed the pace of its bond-buying, but left interest rates unchanged.

Fewer Americans filed new claims for unemployment benefits last week, data showed, as COVID-19 vaccination efforts and massive amounts of government stimulus led to a further reopening of the economy.

While the U.S. economy has been gaining steam, Federal Reserve speakers on Wednesday downplayed the risks of higher inflation.

Those statements reinforced “the lower-for-longer mentality with regards to interest rates,” making the greenback less appealing, said Neil Jones, head of FX sales at Mizuho.

The safehaven U.S. dollar was last down 0.31% at 91.977 against a basket of peer currencies.

“What we’ve seen early in New York is a little bit of back-and-forth gyrations, just because of the Bank of England meeting,” said Erik Bregar, director and head of FX strategy at the Exchange Bank of Canada.

The Bank of England said it would slow the pace of its bond-buying as it sharply increased its forecast for Britain’s economic growth this year after its coronavirus slump, but it stressed it was not tightening monetary policy.

“They kept their QE target in place but they said they are going to reduce the weekly pace of purchases, but that’s not a signal and so sterling has kind of gone up and down and done nothing at the end of the day,” Bregar said.

The pound was last down 0.08% against the weaker dollar at $1.3900 .

The euro was up 0.47% versus the dollar at $1.2061 , and up 0.65% against the pound, at 86.88 pence per euro.

Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

The Australian dollar fell sharply overnight when China said it would stop its economic dialogue with Australia, but the currency had recovered to trade close to flat on the day as European markets opened.

The Aussie was up 0.1% versus the U.S. dollar at 0.77515 at 1028 GMT, having hit as low of 0.7701 overnight.

The New Zealand dollar also dropped and was down 0.1% on the day.

“The announcements of the formal suspension of the economic dialogue between China and Australia should not have a lasting impact on markets given the already strained relationship between the two ahead of the event,” wrote ING strategists in a note to clients.

The Canadian dollar hit a three-and-a-half year high, helped by oil price gains and the Bank of Canada’s recent shift to more hawkish guidance.

In cryptocurrencies, ether traded around $3,500 after reaching a record high of $3,559.97 on Tuesday, skyrocketing nearly 800% this month.

Bitcoin declined 0.2% to $57,392.75.

The meme-based virtual currency Dogecoin soared on Wednesday to an all-time high, extending its 2021 rally to become the fourth-biggest digital coin.

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