Reuters: US Dollar Report: Swiss manufacturing sinks to 3-yr low, may slow more -PMI

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Swiss manufacturing sinks to 3-yr low, may slow more -PMI Jun 1st 2012, 09:01 Fri Jun 1, 2012 5:01am EDT * Swiss PMI at 45.4 in May, below growth threshold * Index at lowest since July 2009 * PMI data shows order backlog falls in May * Retail sales for April barely grow vs year earlier By Catherine Bosley and Andrew Thompson ZURICH, June 1 (Reuters) - Swiss manufacturing activity fell to a three-year low in May and could slow down even more with order books thinning, a survey showed on Friday, as the sector struggles with a strong currency and weak demand from the debt crisis-hit euro zone. The Swiss purchasing managers' index compiled by Credit Suisse fell to a seasonally adjusted 45.4 points in May from 46.9 the previous month, sliding further below the 50 line that separates growth from contraction for the second consecutive month. May's reading was the weakest since July 2009, when companies were reeling from the effects of the Lehman Brothers collapse. The euro zone is Switzerland's biggest trading partner. "A downturn in industrial activity must therefore be expected in the next few months," the survey's authors said, adding that order books in particular had become thinner. Switzerland's manufacturers and exporters are among the sectors suffering most due to the strong Swiss franc, despite a cap of 1.20 per euro on its value set by the central bank last September to reduce the risk of deflation and a recession. Safe-haven buyers anxious about Europe's debt crisis piled into the franc in the first half of last year and nearly drove it to parity with the euro. Other European countries logged similarly dour PMI readings for May, and Germany also saw its manufacturing activity shrink at the fastest pace in three years. "What's particularly worrying is the declining order backlog and the shrinking number of new orders," Credit Suisse economist Bjoern Eberhard said of the Swiss PMI data. "The manufacturing industry remains in a difficult situation. The main reasons are the strong Swiss franc and problems in the Eurozone." Yet thanks in part to strong consumption - skilled immigration is high and joblessness is just 3.1 percent - the economy has managed to maintain momentum despite the overvalued franc. The gloomy Swiss manufacturing data contrasts with surprisingly strong economic growth in the first three months of this year for Switzerland. But after a strong showing in March, retail sales stagnated in April, growing just 0.1 percent, data on Friday also showed. Although the better-than-expected first-quarter growth data was welcome news to many, it may make life more difficult for the Swiss National Bank, which must defend its cap on the franc. The upper limit on the 'Swissie' is seeing increasing pressure as anxiety about the euro zone crisis leads investors to pour money into neighbouring economies seen as safe havens. Link this Share this Digg this Email Reprints

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