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CH: Producer and Import Price Index
| Actual | Previous | |
| Month over Month | -0.3% | -0.2% |
| Year over Year | -1.7% | -1.8% |
Highlights
Producer and import prices fell 0.3 percent in October month-on-month and were 1.7 percent lower than a year ago, extending the contraction seen in September. Particularly hard-hit were watches, measuring and testing instruments, and electrical equipment.
Core producer prices which exclude volatile prices such as agricultural products, petroleum and gas, among others, fell a more modest 0.1 percent month-on-month and 0.8 percent year-on-year.
The watch industry which has been particularly impacted by the 39 percent US tariffs, saw producer prices fall 0.5 percent in October. They are 2.0 percent lower than a year ago. The sector makes up just over six percent of the index. Devices for measuring and testing saw production costs fall 2.2 percent during the month and 1.1 percent year-on-year.
Producer prices alone recorded a 0.2 percent month-on-month and 1.3 percent year-on-year decline, while import prices fell 0.4 percent and 2.7 percent on the same comparison. The strength of the Swiss Franc continues to keep import prices subdued, along with lower prices for imported pharmaceutical preparations. The latter which accounts for more than 16 percent of the import price index fell 0.5 percent on the month and 4.9 percent year-on-year.
Once again, the data show there is no evident pipeline inflation either domestically or from abroad. That, however, masks and underlying problem with is illustrated by the watch industry where the US tariffs are putting the industry under severe pressure. The Swiss federal government has been relatively quiet on the issue, perhaps as it along with other countries as the US Supreme Court weights the legality of the bulk of the tariffs.
Definition
The producer price and import price index focuses on the actual prices of products on the market (transaction price) at the time of the order. The prices of domestic products are taken at the producer or factory level, excluding value added tax and consumption taxes. For imports, prices are collected at the Swiss border, without the value added tax, taxes on consumption and tariffs. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer
Description
The producer price and import price index measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months. Producer and import prices are more volatile than consumer prices. While the CPI is the price index with the most impact in setting interest rates, the producer price and import price index provides significant information earlier in the production process. The producer price and import price index is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace. The bond market rallies when the producer price and import price index decreases or posts only small increases, but bond prices fall when the index posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.