Swiss IP dropped 5.2% q/q (nsa) in Q3 08, indicative of the unfolding recession

In Q3 08, Swiss industrial production (nsa) declined 4.2% q/q after a 9.3% q/q rise (revised up from 8.9% q/q) in the previous quarter. The outcome compares with a market forecast of -2.3% q/q and BarCap's -3.2% q/q. The (wda) y/y rate was 0.7% after 6.4% y/y (revised up from 6.1% y/y reported earlier. In seasonally adjusted terms, IP fell 2.4% q/q after 4.3% q/q in Q2 08. [Note that IP data are published with quite a delay; the third quarter real GDP was published already, showing a flat q/q change.] Manufacturing orders (sa) rose 1.5% q/q, a decline from 2.7% q/q seen in the previous quarter. The outcome is indicative of the ongoing weakening of the Swiss economy, suggesting a path towards recession in 2009. On 11 December, the Swiss National Bank said it expects the economy to shrink between 0.5 and 1% y/y in 2009. Looking ahead, we would expect the SNB to reduce its 3-mths target rate to zero in the coming months.

Thorsten Polleit wrote in a Barclay Capital Research report