Switzerland’s Leading Indicator Plunges to Record Low as Economy Heads into Recession

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CHFUSD – The KOF leading indicator of Switzerland dipped to -0.87 in January, which is the lowest level since the series began in 1991, and reinforces the Swiss National Bank’s dour outlook for growth. Meanwhile, the December reading was revised down to -0.45 from an initial reading of -0.39 in the previous month. The data continues to highlight a weakening outlook for the Swiss economy, and the condition are likely to deteriorate throughout the first half of the year as the SNB expects the economy to contract 0.5%-1.0% in 2009. As the Euro-Zone, Switzerland’s biggest trading partner, faces its first recession in over a decade, the outlook for the export-driven economy bleak as global trade conditions remain far from favorable. For more news and resources, visit the new Swiss franc Currency Room.

EURUSD – The German GfK consumer confidence index held steady at 2.2 in February as the previous month’s reading was revised up to 2.2 from 2.1. The breakdown of the report showed that business expectations declined to -32.9 from -32.4, while the outlook for wage growth plunged to -20.5 from -15.4. Falling prices have certainly helped consumers to deal with the economic slowdown as the annual rate of inflation fell to the lowest level in more than two years, and price pressures are likely to alleviate further as global commodity prices remain weak. However, the optimistic mind-set among constituents could be short lived as the International Monetary Fund forecasts Europe’s largest economy to contract 2.5% in 2009, which could force policy makers to step up their efforts as the outlook for growth remains bleak.
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