Swiss Economy Returns to Growth as Service Sector Recovers

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The Swiss economy rebounded from its pandemic-induced slump in the second quarter, as a relaxation of social distancing restrictions allowed the service sector to ramp up operations. 

Gross domestic product increased 1.8%, just short of the 1.9% forecast in a Bloomberg survey of economists. Hotels, restaurants and leisure all registered a strong rise in activity.  

The Swiss economy has bounced back more quickly than even neighboring Germany. The much-feared wave of spiraling unemployment and business insolvencies hasn’t materialized, thanks in part to fiscal support.

The central bank has also had a hand in stabilizing the economy, pursuing an ultra-expansive policy of negative interest rates plus occasional foreign exchange interventions to prevent a fall in consumer prices. 

Earlier this week, Swiss National Bank Vice President Fritz Zurbruegg affirmed the necessity of the policy, saying that without it, the currency would rise. 

But forward-looking indicators point to growth decelerating as supply-chain issues disrupt the export-reliant economy and the government struggles to boost the vaccination rate, despite a fourth Covid-19 wave. 

While an above-average reading of the KOF economic barometer suggests the growth rate will only cool after its rapid acceleration earlier this year, a sentiment index by Credit Suisse Group AG plunged sharply, implying an abrupt halt.  

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