The Swiss economy has slowed in the first quarter of 2013, with the KOF leading indicator above its long-term average. Inflation is expected to remain low, with PMI indices at very high levels and the health of the manufacturing sector. The weakened German economy is one of the biggest threats to the Swiss economy, and its effects will continue to be felt. The KOF barometer, which measures the performance of the Swiss economy over the past six months, fell for a fourth straight month in January. The revised January reading was below the average analyst expectation.
The KOF institute predicts that the German economy is the biggest threat to the Swiss economy, with a growth rate of only one per cent. The report’s authors note that the franc will continue to strengthen, and will become the strongest currency in the world in the next few years. Despite the negative outlook for the Swiss economy, the franc’s recent drop against the euro is a sign of renewed confidence in the euro zone. While the KOF study presents a pessimistic picture of the German economy, other indicators indicate that the Swiss economy is turning around.
A strong German franc has hurt Swiss exporters. Last week, the franc hit a 22-month low against the euro. Although this is bad news for the economy, it signals a return of confidence in the euro zone. Despite the KOF’s downbeat report, there are still positive signs for Switzerland’s economy. In fact, the Swiss franc fell by the highest level since the 1970s, but the weakened franc is not a major threat to the country’s economy.