Switzerland’s Retail Sales will push lower in March having tumbled -3.8% in the year to February, the most in over 5 years. Consumer confidence has sunk to the lowest since 2002 and UBS has reported that their leading consumption gauge remains well below its long-term average despite a shallow upswing in March and said the outlook for the coming 3-4 months is becoming “increasingly gloomy”. A growing deflationary threat is likely to compound the dour consumption outlook: producer and import prices fell more than economists expected in April, suggesting consumer prices will continue lower after having printed in negative territory in both March and April. If expectations of falling prices become entrenched, retail activity could slip into long-term stagnation as consumers perpetually put off spending to wait for the best possible bargain. It remains to be seen if the Swiss National Bank is able to stave off this dire scenario with aggressive monetary measures including quantitative easing and currency market intervention.
