UPDATE 2-Strong Swiss growth in Q2 to prompt forecast hikes

* Swiss GDP grows 0.9 percent q/q, 3.4 pct y/y

* Govt may revise up 2010 f’cast-economist

* Retail sales up 4.8 pct y/y in July

(Adds possible SECO forecast revision, EU data)

By Catherine Bosley and Sven Egenter

ZURICH, Sept 2 (BestGrowthStock) – Switzerland’s economy powered
ahead in the second quarter as companies cranked up investment
spending, data showed on Thursday, likely to prompt both the
government and the central bank to revise up growth forecasts.

Gross domestic product grew 0.9 percent from the previous
quarter in real terms, the State Secretariat for Economic
Affairs (SECO) said. Economists had expected 0.8 pct growth.

An economist at the SECO told Reuters the government’s
current forecast of 1.8 percent GDP growth for 2010 was too
conservative and might well be revised up, given the good
showing so far this year. [ID:nWEA6598]

“The Swiss economy is red hot… although this is probably
the high point,” said UBS economist Reto Huenerwadel. “From here
it’s going to become more difficult.”

The Swiss National Bank, which in June dropped its pledge to
intervene in currency markets to cap excessive gains in the
currency, will review its current forecast of around 2 percent
when it holds its next policy meeting on Sept. 16.

“The fundamentals continue to point to a risk of a hike
before the end of this year if conditions in the markets allow,”
BNP Paribas economist Eoin O’Callghan said. “The hurdle to a
hike remains the franc – which has risen to new record highs.”

The Swiss franc, which hit a record of 1.2848 per euro on
Aug. 31, rose versus the euro after the GDP data was released.
(EURCHF=: )

The current market consensus is for no rise in borrowing
costs — currently at an ultra-low 0.25 percent — until
mid-2011 and SNB Chairman Philipp Hildebrand said in an
interview risks to the economy had increased in recent months.

POSSIBLE COOLING

Switzerland has weathered the crisis better than many of its
European neighbours thanks to its resilient consumers, though
recent surveys have indicated the recovery could well slow due
to the strong franc and faltering U.S. economy.

Retail sales, however, kicked the third quarter off to a
strong start, surging 4.8 percent on the year in July.

“The Swiss National Bank might raise its growth forecast for
… 2010 but the message will remain the same: good growth for
the whole year but a slightly weaker second half,” Sarasin
economist Alessandro Bee said.

The GDP data showed that consumer spending was flat on the
quarter and goods exports nudged up only 0.1 percent.
[ID:nZAT010980]

SECO-economist Bruno Parnisari told Reuters the strong
currency may hit exports in the next 2-3 quarters but that so
far no effect had been felt.

Similarly to Switzerland, where company investments were a
big driver of growth, higher household spending and investment
propelled GDP in the euro zone, Switzerland’s largest trading
partner, up 1 percent in the second quarter, with a large part
of that rise due to strong momentum in Germany. [ID:nLDE6810XR]
(Additional reporting by Silke Koltrowitz; editing by Chris
Pizzey)

UPDATE 2-Strong Swiss growth in Q2 to prompt forecast hikes