However, growth in Europe remained weak and the economic prospects for the euro area deteriorated. In the longer term, the deterioration in growth prospects for the euro area dampens inflation.
Euro area
Japan
Emerging economies in Asia
In particular, the significant appreciation of the Swiss franc during the summer weighed heavily on the Swiss economy. This is solely due to the favorable economic development in the first half of the year.
Aggregate demand and output
Exports to emerging Asian economies were in the red for the first time since the financial crisis. Investments in equipment continued to fall in the third quarter (by 8.7%), which was probably due to the difficult competitive situation and shrinking margins.
Labour market
Capacity utilisation
Outlook for the real economy
Consumer prices
The steady strengthening of the Swiss franc, which lasted until August, particularly depressed the prices of foreign goods and services. Excluding oil products, the prices of these goods in November were 5.1% lower than in the same period the previous year. As a result of downward pressure from low purchase prices abroad, prices of domestic goods also fell.
The SFSO core inflation rate (SFSO1), reduced mean (TM15) and dynamic factor inflation (DFI) can be used to estimate the CPI. DFI calculates core inflation using an empirically estimated dynamic factor model that includes other real and nominal economic data in addition to price data, while in QM15 the prices of goods with the highest and lowest annual inflation rates each month are excluded (15% at both ends of the distribution ). Q15 – like the SFSO core inflation rate – is thus based on a discounted CPI basket.
Producer and import prices
Real estate prices
This new definition explains the drop in the reference rate by a quarter of a percentage point to 2.5% in December. As a result of this decline, inflation in existing rents is expected to remain low and lower than that of new rents.
Inflation expectations
As a result of the significant expansion of liquidity to combat the strength of the Swiss franc in August, some short-term interest rates turned negative. The expansionary effects of monetary policy are also evident in the growth of the money supply and in real interest rates, which have remained at a low level. Since the introduction of the minimum exchange rate on 6 September 2011, the Swiss franc to the euro exchange rate has been above CHF 1.20.
Compared to August, the Swiss franc has even depreciated more against the US dollar than against the euro. In August, the SNB significantly increased liquidity to weaken the highly overvalued Swiss franc. The SNB will continue to maintain liquidity at extremely high levels, but has decided not to set a specific target level for demand deposits for the time being.
Both domestic mortgage loans and business lending in the real economy have continued to have robust growth. In contrast, the banks reported a minor tightening of lending standards and conditions for business loans – especially loans to large companies.
Summary of monetary policy since the last assessment
This shows that banks still want to hold large amounts of liquidity and that the increase in demand deposits with the SNB cannot be expected to have the usual effect on the growth of the money supply through the money multiplier. Swap agreements with other central banks On November 30, the SNB, together with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Federal Reserve Bank, announced the establishment of a temporary network of mutual swap lines. Central banks have thus expanded their capacity to provide liquidity to the global financial system beyond existing US dollar swap contracts.
The swap agreements enable the SNB to supply other central banks with Swiss francs as needed. It would also be able to provide liquidity in Canadian dollars, sterling, yen and euros in addition to the existing operations in US dollars. The central banks concerned also agreed to extend the existing US dollar swap arrangements and to lower the interest rate on such swap arrangements.
In addition, on September 15, the SNB, in coordination with the Federal Reserve and other central banks, decided to offer US dollar liquidity tenders with a term of three months to cover the end of the year.
Money and capital market interest rates
Both Confederation bond yields and inflation expectations, approximated using inflation forecasts from various SNB models, have declined slightly since the mid-September estimate. Estimated real interest rates in the three-year period were -0.1% in mid-December, the same as in mid-September (cf. graph 5.3). On the other hand, this meant that safe investments such as Swiss Confederation bonds became more attractive.
Investor uncertainty is also reflected in higher interest premiums for bonds from companies with low credit ratings compared to companies with good credit ratings. The increase in short-term interest rates from negative to positive territory, combined with a slight decrease in long-term interest rates, has meant that the yield curve has flattened somewhat over the past three months (cf. Figure 5.2). The difference between the yield on ten-year confederation bonds and the three-month Libor, which stood at 1.0 percentage points in mid-September, was 0.8 percentage points in mid-December.
Exchange rates
Stock markets
Monetary and credit aggregates
Measured against year-ago rates, credit growth increased from 3.8% in the second quarter to 4.6% in the third quarter (cf. table 5.1). This trend is also reflected in the growth of loans in Swiss francs, which constitute about 96% of the total loan (see graph 5.11). Having been virtually unchanged in 2009 and 2010, Swiss franc credit growth picked up again sharply in the second and third quarters of 2011.
The more volatile growth of other Swiss franc loans returned to positive territory in the second quarter. The SNB's quarterly credit survey does not show any substantial changes in lending standards or conditions in the third quarter related to mortgage loans for individuals. The strong growth of bank credit is reflected in the ratio of bank credit to nominal GDP (see chart 5.12).
Experience shows that excessive growth in lending is often the cause of later difficulties in the banking sector. They may therefore differ from growth rates published in the Monthly Overview for Bank Statistics.
Business cycle trends SNB regional network
In general, the burden on the economy is significant and has increased further, especially in the service sector (cf. Business activity has significantly lost momentum, also due to the slowdown in the global economy. In the service sector, turnover has remained generally stable , as in the previous quarter, both quarter-on-quarter and year-on-year.
In construction, the utilization of technical capacities was already very high and has increased even further in the period under review. In the services sector, the utilization of capacities has been assessed as generally normal, as in the previous quarters. Consequently, as in the previous quarter, a limiting factor is often the lack of staff availability.
In the service sector, respondents in virtually all industries considered their profit margins to be generally below average. As in previous quarters, companies that participated in the October/November 2011 survey were again asked about the impact of the Swiss franc appreciation on their businesses. In general, companies in the service sector are cautiously optimistic about the business trend in the next six months.
However, revenue growth is expected to be significantly lower than in the previous quarter.
Exchange rate survey
Effects of Swiss franc appreciation and company reactions SNB regional network
Of the companies surveyed, 63% (previous quarter: 58%) reported negative effects of the appreciation of the Swiss franc (39% significantly and 24% moderately negative). A total of 29% of companies (previous quarter: 31%) stated that the appreciation of the Swiss franc did not significantly affect their operations. Also, no construction company reported more significant positive effects of appreciation.
A total of 143 companies reported moderate or significant negative effects from the appreciation of the Swiss franc. The industries most affected by the negative effects of the appreciation were textiles and clothing, metals and machinery, and manufacturing. Companies were also asked about the measures they had already taken to counter the consequences of the appreciation of the Swiss franc.
Overall, 19 companies surveyed (8% of the total, versus 10% in the previous quarter) experienced moderate or even significantly positive effects from the appreciation of the Swiss franc. The assessment was carried out for two subgroups – firstly, companies negatively affected by the appreciation of the Swiss franc and secondly, all other companies.
Chronicle of monetary events
December 2011 With its quarterly assessment on December 15, the SNB reaffirms that it will continue to very resolutely enforce the minimum exchange rate and is ready to buy foreign currency in unlimited quantities. Even at the current exchange rate, the SNB believes that the Swiss franc is still high and should continue to weaken over time. The SNB plans to continue to carry out liquidity-enhancing repo operations in US dollars at terms of one week and three months.
September 2011 On 15 September, the SNB, in coordination with the Bank of England, the Bank of Japan, the European Central Bank and the Federal Reserve, decides to offer US dollar liquidity with a term of 84 days to the end of to cover the year. . At its quarterly assessment of 15 September, the SNB confirms that it will enforce the minimum exchange rate of CHF 1.20 per euro set on 6 September with the utmost determination. It still aims for a three-month Libor at zero and will maintain total sight deposits at the SNB at well above CHF 200 billion.
In addition, the SNB points out that, even at a rate of CHF 1.20 per euro, the Swiss franc is still high and should continue to weaken over time. If the economic outlook and deflation risks require it, the SNB will take further measures.
