Swiss Growth Slows on Declining Domestic Demand

Switzerland's GDP grew 0.3% in the first quarter, which was the slowest pace in 3 ½ years. Domestic demand declining 1.8% accounted for the majority of the slowdown as inflation diminished consumer's purchasing power. Indeed, the slowdown in demand also saw a 3.2% drop in imports. Additionally, the country saw construction fall 0.6% from 1.7% the quarter prior. The Swiss economy has begun to feel the effects of the headwinds from the U.S. subprime crisis as it has impacted several of the large Swiss banks. Nevertheless, manufacturing has held strong, as their ability to differentiate their products has allowed them to remain competitive despite the strength of the Swiss Franc. The SNB is expected to keep rates unchanged as rising inflation and declining growth keep them in check.

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