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Swiss Q2 Growth Tops Expectations

SwissGDP 090313

Switzerland's economy expanded more-than-expected in the second quarter largely due to positive contributions from private spending and investment.

Real gross domestic product expanded 0.5 percent sequentially, figures published by the State Secretariat for Economic Affairs (SECO) showed Tuesday. Although the rate of growth slowed marginally from 0.6 percent, it was well above the 0.3 percent expansion forecast by economists.

The Swiss economy managed to avoid contraction continuously for seven consecutive quarters, when the 17-nation euro area bloc experienced a severe recession. With a 0.3 percent rise in GDP, the region exited recession only in the second quarter.

The expenditure side breakdown of GDP today showed that Swiss household spending gained 0.6 percent as seen in the previous quarter. Healthcare has been the key component in the growth of private consumption for four quarters.

At the same time, investment recovered strongly in the second quarter, up 1.4 percent after falling 0.2 percent. Expenditure in machinery and equipment improved for the first time in a year, while investment in construction declined from the first quarter.

By contrast, the balance of trade in goods contributed negatively to GDP growth, reflecting lower exports and higher imports. Exports of goods dropped by 0.9 percent due to the strength of the franc, while imports gained 1.4 percent. The services sector saw a continuation of the recovery in the export of tourism.

On the production side, there was a reduction in value-added in the areas of industry and the construction sector, the report said. Meanwhile, many areas of the services sector contributed positively to overall growth.

On a yearly basis, economic growth more than doubled to 2.5 percent from 1.2 percent a quarter ago. The annual figure far exceeded the 1.7 percent consensus.

Earlier in June, the state agency projected 1.4 percent growth for 2013 and 2.1 percent for next year. It expects the export sector to benefit from economic opportunities present outside Europe, particularly in North America and Asia.

The Swiss National Bank sees growth in the range of 1.0 percent to 1.5 percent for 2013. The economic growth numbers suggest that the economy benefited from the currency ceiling measure.

The central bank has maintained the exchange rate of Swiss franc at 1.2 per euro since September 2011 in order to contain the undesirable strength of the currency.

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