Swiss September Producer, Import Price Growth Slows

By Simone Meier

Oct. 13 (Bloomberg) -- Swiss producer and import price growth slowed for a second month in September, adding to signs of easing inflation pressures.

Prices ranging from factory to farm goods as well as imports rose 3.7 percent from a year earlier after gaining 4 percent in August, the Federal Statistics Office in Neuchatel said in a statement today. Economists expected a gain of 3.9 percent, according to the median of seven estimates in a Bloomberg News survey. Prices fell 0.5 percent in the month.

The price of crude oil has dropped 45 percent from a record $147.27 a barrel on July 11, easing pressure on companies to pass on higher costs just as the economy cools. The Swiss central bank along with its largest counterparts around the world last week trimmed borrowing costs to shore up financial markets, saying the crisis has ``diminished'' risks to inflation.

``The data only confirms that inflation was never the biggest problem,'' said Reto Huenerwadel, an economist at UBS AG in Zurich. ``The impact of the financial crisis will be substantial. There's still a lot of uncertainty.''

The Swiss National Bank in coordination with other central banks said today it will offer unlimited dollar funds to financial markets to restore confidence. The Zurich-based central bank last week cut its key rate by 25 basis points to 2.5 percent after the credit crunch pushed up lending costs and forced governments across Europe to bail out banks.

Credit Losses

SNB President Jean-Pierre Roth told Aargauer Zeitung newspaper in an interview published today that the bank is ready to cut interest rates again ``if the economic situation worsens further.'' Still, Swiss banks have a better capitalization than their rivals abroad, he said.

The world's largest financial companies have posted more than $635 billion in writedowns and credit losses since the start of last year after the U.S. housing market collapsed.

In Switzerland, slowing economic growth is making it more difficult for companies to pass on higher costs. The jobless rate unexpectedly rose to 2.6 percent in September when adjusted for seasonal swings from 2.5 percent. Manufacturing last month contracted for the first time in more than five years.

Swiss producer prices rose 3.1 percent from the year earlier period, while declining 0.5 percent in the month, today's report showed. Import prices increased 4.9 percent from September 2007 and declined 0.7 percent from August. Core inflation, excluding volatile costs such as energy, rose 1.9 percent from a year ago and fell 0.1 percent in the month.

To contact the reporters on this story: Joshua Gallu in Zurich at jgallu@bloomberg.net; Simone Meier in Frankfurt at smeier@bloomberg.net.