(Bloomberg) -- Inflation in Switzerland unexpectedly slowed in September on a weaker rise in energy costs, defying soaring prices across Europe.
Swiss consumer prices rose 3.3% from a year earlier, data from the Federal Statistics Office showed Monday. While the reading is much lower than the 3.6% economists had expected, it still means that inflation has exceeded the Swiss National Bank’s 2% target for an eighth month. Core inflation, which strips out volatile elements, hit 2%.
Based on the European Union-harmonized measure, Switzerland’s inflation was at 3.2%, compared with 10% in the euro zone, which just touched double digits for the first time ever.
A gauge of Swiss manufacturing activity unexpectedly rose, meanwhile. The procure.ch Purchasing Managers’ Index reached 57.1 points in September, up from 56.4 points in August, halting its decline and indicating ongoing growth, Credit Suisse AG said Monday. Economists had expected a further drop to 54.6 points.
“Output has increased, order books remain full, and businesses are continuing to add to their workforce,” Credit Suisse chief economist for Switzerland Claude Maurer wrote. “Conversely, elevated energy prices are a major challenge.”
Almost one-third of manufacturers surveyed are worried about production outages in the next six months due to high energy prices, with 36% of those also seeing a risk of short-time working.
Some 60% of companies reported an increase in purchasing prices in September, according to the survey, indicating that they are rising more broadly again.
Rising consumer prices in other European countries are a key reason for strong inflation in Switzerland. According to a recent SNB report, import prices in August rose 8.6% from a year earlier. Still, the Swiss central bank’s decision to let its currency appreciate has kept inflation much lower than elsewhere in the region.
In order to combat high prices, the SNB has increased interest interest rates by 125 basis points since June, and officials may raise borrowing costs again at their next scheduled policy meeting in December. If the inflation outlook changes, another hike could also come before that, though SNB President Thomas Jordan has set a high bar for such a move.
(Updates with PMI data from fourth paragraph.)
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