Swiss Inflation Reaccelerates

Swiss inflation rose by 0.9% in January after being dead flat in December. The rise in the HICP for Switzerland is the largest month-to-month rise in this cycle and the largest increase for quite some time, spurred by food, housing and energy prices. The same is true of the Swiss domestic CPI measure which rose by 0.7% in January after a 0.1% increase in December. Both the HICP and the Swiss CPI measures are rising at a 4% annualized rate over three months. Below I will focus on the CPI rate because its details are presented in the rest of the table.

The Swiss CPI is up by 3.3% over 12 months; it's up at a 2.5% annual rate over six months, showing some deceleration, and then, it accelerates sharply to 4% over three months. The core inflation rate, which rose by 0.4% in January after rising by 0.2% in both November and December, is up by 2.2% over 12 months; it's up at a 2% annual rate over six months and then it accelerates to a 3% annual rate over three months.

Switzerland presents a category of prices that is unusual among CPI reporters; it's a category of price changes excluding administered prices. That category shows prices rise by 0.5% in December after rising by 0.2% in December and 0.3% in November. The progression of prices in this category shows a 2.9% rise over 12 months, a slight deceleration to a 2.7% pace over six months and then acceleration to 4% over three months. Excluding administered prices doesn't have much impact on the rate acceleration, but it does reduce the level of year-over-year inflation compared to the headline but not compared to the core.

Among the eight categories in the table for Swiss consumer prices, there is consistent acceleration reported only for housing and energy where the prices are not seasonally adjusted. But in that category, prices rise by 5.1% over 12 months, at a 5.4% annual rate over six months and at a 7.3% annual rate over three months. Prices show deceleration on a consistent basis for health care with the inflation rate of minus 0.4%, deteriorating to minus 0.5% over both six months and three months when annualized.

Swiss inflation has accelerated recently and has a rate above 3% over 12 months and above 4% over three months, but when we measure the inflation performance on a compounded basis since January 2020 before COVID struck, the HICP inflation rate has only been rising at a 1.4% pace and the CPI has risen only at a 1.5% pace. In fact, most categories are quite well behaved with housing and energy showing a 2.7% inflation rate over that span. Transportation, another not-seasonally-adjusted category, shows inflation running at a 3.1% pace over the period. Apart from those, all the categories are showing inflation rates below 2% with health showing prices falling on balance, logging a -0.4% annual rate from January 2020.

At the bottom of the table, we reference the inflation rate for the European Monetary Union on its HICP measure. This measure is lagged because the data for January are not yet available. What we see is the substantial difference between inflation in Switzerland and in the European Monetary Union despite the union’s 2% goal. We see that over 12 months the EMU inflation rate has been at 9.2% instead of the 3.2% the Swiss posted. Over six months, EMU inflation is lower at a 7.1% pace, compared to a much lower 2.8% pace in Switzerland. Over the recent three months, the EMU pace is at 4.6% pace compared to 4.4% in Switzerland, a much closer comparison. These numbers are slightly out-of-sync because we are looking at the up-to-date European Monetary Union data which are lagged by a month against the Swiss data which are up to date through January. But they shouldn't be that dramatically different. What we do see is that EMU inflation over 12 months and six months has been quite substantially stronger than inflation has been in Switzerland. Even though Switzerland has been in a relatively high inflation environment, it has managed to keep its domestic inflation rate much more in check. And while it faces a minor inflation problem currently, there's no sense that it's particularly become entrenched. There is high inflation in two categories: (1) housing & energy inflation runs at a 7.3% annual rate over three months and (2) food & beverage inflation runs at a 6.1% inflation rate and that has been consistently elevated. It is increasing at a 5.6% pace over 12 months and a 6.7% annual rate over six months; the 3-month inflation rate of 6.1% is a step down. However, in the month of January food & beverage inflation exploded again, rising by 1.5% on the month. Still, overall Swiss inflation is remarkably well-behaved especially in a more global context.