Switzerland: Country Economic Forecast: 17 Apr 2013

Recent indicators suggest a weaker start to 2013 than expected, with a disappointing fall in trade in February as goods exports were 1.8% lower than a year earlier. Another negative signal came from the manufacturing PMI, which slipped into negative territory in March at 48.3. The last-minute Cypriot banking sector rescue and the unclear outcome of the Italian election will have renewed uncertainties for Swiss companies. We think these will be short-term effects, however, and will not prevent the Swiss economy from expanding this year. Nevertheless we have cut our 2013 growth forecast slightly to 1.2% (from 1.4%) to reflect the slow start. Latest data are still in line with a modestly growing economy rather than recession. Domestic demand is fairly robust, and retail sales saw a relatively good start to 2013, up an annual 2.6% in February. We also expect stronger construction in the wake of last year's rush for applications to build second homes before a change in regulations. The equity and housing markets have been performing well, signalling rising confidence about future growth prospects. We continue to expect growth to be close to 2% in 2014. And we still expect world trade to revive gradually as the year progresses, after a shaky opening few months.