Switzerland: Inflation continues to decline in October

Inflation continued its gradual decline in October. Consumer prices fell in hotels and international package tours. Gasoline, diesel, fruits and vegetables also contributed to this trend, while clothing, shoes, maintenance and janitorial services did not.

The consumer price index (CPI) increased by 0.6% over one year to 107.1 points, the Federal Statistical Office (FSO) said on Friday. The increase in prices is thus lower than the forecasts of economists surveyed by the AWP agency, who expected an increase of between 0.7 and 0.9%.

Over one month, inflation fell by 0.1%.

Core inflation, i.e. the long-term evolution of prices, shows a more marked increase over one year. The increase in the related sub-index reached 0.8% (+ 0.1% monthly) to 105.0 points.

Indigenous products pushed consumer prices upwards, evidenced by an increase of 1.8% (-0.1% over one month) to 106.7 points. Tariffs for imported products fell by 3.1% (-0.1%) for a sub-index of 108.2 points.

Weighing almost a quarter in the calculation of the CPI, the “Housing and energy” group remained stable compared to September, but increased by 3.5% compared to October 2023. For food and non-alcoholic drinks ( 11% of the index), federal statisticians noted respective declines of 0.7% and 0.3%. Health prices, which cover 15% of the whole, fell by 0.8% year-on-year and by 0.1% month-on-month. Transport (11.5% of the CPI) also followed a downward trend, -2.7% over one year.

No acceleration since June

Inflation has been on a downward curve for several months now. In September, inflation stood at +0.8%, after +1.1% in August then +1.3% in June and July. Over the whole of 2023, the CPI increased by 2.1%.

In the short term, relative price stability seems to predominate, summarizes Arthur Jurus, economist with the Franco-German broker Oddo BHF. Inflation remains moderate but persistent in the longer term, as shown by the core inflation sub-index. The notable drop in imported prices contrasts with the increase in domestic products, indicating that domestic demand remains relatively stable, specifies the specialist.

For three years, inflation has been approaching the Swiss National Bank (SNB) target of 2%. The level of inflation, however, remains “much lower” than the forecasts of the issuing institute, recalls Mr. Jurus. Based on a stable key rate of 1%, the SNB forecasts +1.2% in 2024, +0.6% in 2025 and +0.7% in 2026.

The economist thus predicts a reduction by the Central Bank of 25 basis points (bp) of the key rate in December and a further cut of 25 bp next March, bringing the key rate to 0.50%. This will not be enough to counter the strong franc: the Swiss currency will continue to appreciate, predicts Arthur Jurus.

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