Inflation in Switzerland hits 3.4 percent for June
Switzerland’s inflation rate hit 3.4 percent in June, due largely to the lingering impact of Covid, the Ukraine war and a spike in fuel prices.
Switzerland’s Federal Statistical Office made the announcement on Monday, July 4th.
The 3.4 percent figure was higher than expected, although some experts indicated it was within their broad predictive models.
This was an 0.5 percent increase compared with May.
Despite the increase however, the inflation rate is far lower than that in other parts of the world.
The Eurozone is currently experiencing a 8.6 percent inflation rate. The United States is also seeing similarly high inflation figures, with a current rate of 8.6 percent.
The combined impact of Russia’s invasion of Ukraine along with the lingering effects of the Covid pandemic have pushed fuel prices higher, which have in turn further driven cost increases.
Fruit and vegetable prices have risen, as have prices for things like grain.
Why is the Swiss rate so much lower than elsewhere?
There are a number of explanations for this phenomenon:
In good times and bad, the Swiss franc remains strong, sometimes even reaching parity with the euro. This acts as a defence mechanism of sorts by keeping import prices low.
As Switzerland relies on imports much more than many other countries, including the United States and Germany, lower costs of imports have a 'cooling effect' on inflation.
“This makes imports cheaper across the board. The strong franc helps the Swiss have high purchasing power internationally. And imported goods are the main drivers of inflation,” according to the Neue Zürcher Zeitung.
Less reliance on Russian energy sources
Energy prices are "fundamental in explaining the differences in inflation, especially between Switzerland and the eurozone”" according to an analysis by EFG private bank.
"This is almost totally due to differences in the price of electricity. In February and March, the price of electricity in Switzerland rose by only 2.4 percent, while in the eurozone it surged by 34.3”, the bank reported.
The reason for this, EFG found, are different technologies used to produce electricity.
Data from the International Energy Agency shows less than 1 percent of the electricity consumed in Switzerland comes from oil and natural gas, while 58 percent originates from renewable sources like hydroelectric and nuclear power.
“By comparison, in the European Union over one-fifth of the electricity is produced with natural gas and over one eighth with coal”, the banks’ analysts found.
The gap was even wider for electricity prices: in February, the wholesale price of electricity in Switzerland was 3.1 percent higher than a year before, while in in the eurozone the increase was as much as 83.2 percent.