Economy in Brief: November 2023

Inflation in Switzerland continued post solid low inflation numbers as the headline rose 0.1% in the HICP measure for the third month in a row. The Swiss CPI measure rose by 0.1% in October, the same as in September and compared with a 0.2% increase in August. Switzerland’s core measure rose 0.2% in October after being flat in both September and August.

Switzerland continues to have outstanding inflation performance and continues to consistently outperform Germany as well as the European Monetary Union in this regard.

Sequential inflation rates measured on the HICP scale show 2% inflation over 12 months, decelerating to a 1.7% pace over six months and decelerating to a 1.1% annual rate over three months. The Swiss CPI is up by 1.7% over 12 months and at a 0.9% pace over six months; it accelerates to a 1.5% annual rate over three months. The Swiss core rate is up by 1.5% over 12 months, and at a 0.5% annual rate over both six months and three months.

These numbers are the envy of all other central banks during this period. Globally, inflation has flared, and central bankers have overshot their targets consistently. Switzerland has been able to contain inflation better than in other central banks.

Looking at the inflation rate annualized since January 2020, before COVID struck, the Swiss HICP measure is up at a 1.8% annual rate; the domestic measures is up at a 1.8% annual rate as well; the Swiss core rate is up at a 1.2% annual rate. Excluding Swiss administered prices, inflation is up at a 1.7% annual rate over the same span.

Inflation detail for October shows some acceleration for inflation month-to-month. The core rate is up to 0.2% compared to a 0 percent change in September. Excluding administered prices, inflation rose by 0.3% in October compared with a 0.1% decline in September. Food & beverage prices rose 0.4% in October compared to -0.2% in September; health costs were flat in October after falling by 0.1% in September; recreation & culture events saw prices rise by 0.3% in October after falling by 0.1% in September. The catch-all ‘other goods and services’ saw prices rise by 0.2% in October after being flat in September. None of these changes is particularly concerning in the monthly report.

Over three months, the Swiss HICP measure decelerates, the Swiss core measure is unchanged, compared to its six-month pace and the Swiss domestic headline measure accelerates to 1.5% after a 0.9% rise over six months. Categories showing prices accelerate over three months compared to six months across the board. Accelerating most sharply over three months are clothing & footwear prices that rose at a 35.1% annual rate, but the series is not seasonally adjusted. There is acceleration posted in transportation as well as in health and recreation categories; however, among these three categories two of those three log price declines on the month. Yet all three categories show price acceleration because prices declined substantially over six months! Education costs accelerated and they're also not seasonally adjusted, but they rise from a 1.8% pace over 12 months to a 3.6% pace over six months to an annual rate of 7.3% over three months. That progression is suggestive of true underlying price pressures. The other goods & services category shows consistent pressure but just by a tick period-to-period.

The Swiss unemployment rate remains low at 2.1% in September, the same as August six-months ago. The rate had been as low as 1.9%; a year ago it was at 2.1% and two years ago it was at 2.9%. Since COVID struck in January 2020, the unemployment rate is lower by 1.4 percentage points. The Swiss economy is performing very well on the inflation front. But in real terms, the economy is beginning to experience some slowing even though it is not reflected in the rate of unemployment yet.