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Swiss Economy Expands In Q4 Amid Weaker Outlook

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Switzerland's economy expanded in the fourth quarter of 2018 and the full year growth improved strongly, as a stagnation in domestic demand was offset by robust manufacturing and exports, but survey data showed the a weaker phase is set to surface in the coming months.

Gross domestic product grew 0.2 percent from the previous quarter, preliminary data from the State Secretariat for Economic Affairs, or SECO, showed on Thursday. Growth was slower than the 0.4 percent expansion economists had predicted.

The pace of contraction in the third quarter was revised to 0.3 percent from 0.2 percent.

In the first and second quarters, the Swiss economy grew 0.9 percent and 0.7 percent, respectively.

Manufacturing grew 1.5 percent, which benefited from the strong global demand for Swiss products. Dynamic growth in manufacturing during the fourth quarter was mainly driven by the chemical and pharmaceutical segments.

Exports surged 5.6 percent, while imports fell 0.5 percent.

Household consumption grew 0.3 percent, mainly due to health spending. Investments in construction fell 0.4 percent and those in equipment shrunk 1.1 percent.

Year-on-year growth slowed to 1.4 percent in the fourth quarter from 2.4 percent in the previous three months. Economists were looking for 1.7 percent growth.

Full-year growth accelerated to 2.5 percent in 2018 from 1.6 percent in the previous year. Growth was driven mainly by manufacturing, while trade declined for the first time since 2011.

Elsewhere on Thursday, a measure of Switzerland's future economic performance declined for a fifth consecutive month in February and at a sharp rate, suggesting that the economy is set for some slowdown in the coming months.

The KOF Economic Barometer fell to 92.4 from January's 96.2, which was revised from 95 reported initially, figures from the Zurich-based KOF Swiss Economic Institute showed. Economists had expected the reading to remain unchanged at 95.

"The Swiss economy can expect to experience a weak phase in the coming months," the KOF said.

The marked decline in February was mainly due to negative impulses from the manufacturing industry, the think tank added.

In December, the SECO trimmed its growth forecast for this year to 1.5 percent from 2 percent, citing weak domestic demand. Growth is expected to rise slightly to 1.7 percent next year.

The Swiss National Bank also expects growth of nearly 1.5 percent this year.

ING economist Charlotte de Montpellier expects the Swiss economy to grow at a rate of around 1.2 percent this year.

"This slowdown in growth, combined with still very low inflation, implies that the Swiss National Bank is very far from being able to normalize its monetary policy," the economist said.

"We believe that it will not be able to raise rates during this cycle and that the SNB's key rate will remain negative and at its current level (-0.75%) until at least 2021."

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