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UPDATE 1-Swiss leading indicator slips less than expected in Feb
February 27, 2013 / 9:45 AM / in 5 years

UPDATE 1-Swiss leading indicator slips less than expected in Feb

* KOF falls to 1.03 in Feb vs revised 1.12 in Jan

* KOF eyed for trough in coming months

* February PMI data due on Friday

* SNB seen remaining vigilant (Adds economist comment, detail.)

ZURICH, Feb 27 (Reuters) - Switzerland’s economic momentum slipped again in February, though the smaller-than-expected drop led economists to believe it will turn a corner next month.

The Swiss economy has largely avoided the problems plaguing the neighbouring euro zone, its biggest trading partner, although its strong currency remains a concern as it makes the country’s exports more expensive.

The KOF barometer of economic sentiment, which predicts performance in roughly six months, slipped to 1.03 points in February from a revised 1.12 points in January, the KOF Swiss Economic Institute said on Wednesday.

Analysts had forecast an average of 1.00 points.

Though several economists, including at the country’s biggest banks UBS and Credit Suisse, said the February reading was better than expected in part because January’s indicator was revised sharply higher, optimism still prevailed.

“It appears we are seeing the KOF bottoming out, especially in light of the strengthening in PMI,” Bank Sarasin Jan Poser said.

“Maybe next month already we’ll see that the KOF has actually bottomed (out), reflecting a recovery in the Swiss economy.”

Resilient trade and other data highlight how the Swiss economy has been partly able to shield itself from the euro zone’s debt woes.

Despite the improving economic picture, however, Swiss National Bank Chairman Thomas Jordan said last week the central bank is far from exiting its policy of capping the franc at 1.20 per euro. [IDD:nL9E8MC07Q]

Swissquote economist Peter Rosenstreich said the Swiss economy isn’t out of the woods yet, and remains exposed to substantial risk.

“For the SNB this means that inflation will be at risk and they will need to remain vigilant. In addition, from a market view, deflation data could fuel speculation of additional central bank action,” Rosenstreich said.

The SNB has repeatedly said it stands at the ready to implement further measures to protect the economy if necessary, although it has not said what those measures might be.[IDD:nL9E8MC07P]

Economists polled by Reuters expect February’s survey of Swiss purchasing managers (PMI) to fall to 52.2 points from 52.5 in January on Friday. (Reporting by Katharina Bart and Martin de Sa‘Pinto; Editing by Hugh Lawson)

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