Prices are rising again in Switzerland, raising questions about whether the introduction of the 13th AHV pension in December will intensify inflationary pressures. In a few weeks, retirees in Switzerland will receive a 13th AHV pension payment for the first time, timed ahead of the Christmas holiday. While the anticipation is high, the financing remains unsettled, as the authorities' proposed value-added tax increase still requires a vote.
Consequently, the impact on domestic inflation remains unclear. Data released showed that the national consumer price index picked up in October, with year-on-year inflation standing at 1.5 percent, higher than expert expectations. Salomon Fiedler, an economist at Deutsche Bank, provided calculations regarding the 13th AHV pension, noting that the 4 billion Swiss francs in estimated additional costs correspond to 0.5 percent of this year's projected economic output or one percent of private consumption expenditures.
Fiedler expects the impact on consumer prices to be lower, reasoning that Swiss citizens are inclined to save and will likely put aside roughly a quarter of the 13th AHV pension. Furthermore, the federal government will shoulder approximately 20 percent of the extra costs through transfer payments, which will moderate the effect on overall demand. Nevertheless, Fiedler acknowledges a risk that a significant share of retirees may choose to spend a large portion of the payment promptly, potentially triggering a short-term surge in inflation and uncertainty in the coming months.
The planned value-added tax increase, should it be approved at the ballot box on November 29, may also shape economic conditions. The proposal entails raising the standard rate by 0.4 percentage points and the special rate for accommodation services by 0.2 percentage points. James Mazeau, an economist at UBS, suggests that low-income households would feel the tax increase disproportionately relative to their income and might be forced to reduce consumption, which could somewhat cushion the impact on economic output and inflation trends.
Deutsche Bank has raised its peak winter forecast for annual inflation to 1.5 percent from 1.25 percent previously, while leaving projections for subsequent years unchanged. The major bank's interest rate expectations also remain steady, anticipating that the Swiss National Bank will maintain its zero-interest-rate policy through the end of 2028.
In the corporate sector, laboratory equipment manufacturer Tecan experienced a notable shift in market sentiment. At the end of April, with its share price at 115 Swiss francs, the company was viewed as a concern in local market circles. Less than seven months later and more than 130 francs higher, the Männedorf-based firm has recovered. Following a third-quarter interim report and a slight upward revision to its annual financial targets, the stock reached a peak of up to 278 Swiss francs last Thursday morning before profit-taking set in.
Elmar Sieber, an analyst at Basler Kantonalbank, revised his stance on Tecan. Based on the updated financial targets, he upgraded the stock from market-weight to overweight, setting a price target of 280 Swiss francs, up from 240 francs. This reverses an adjustment made four weeks prior, when Sieber had downgraded the shares from overweight to market-weight despite raising his price target to 240 francs from 220 francs. Sieber had previously initiated coverage on the stock in January with an overweight rating and a price target of 180 francs when shares traded just above 150 francs.
Meanwhile, investors are watching whether Thomas Schmidheiny will retain his stake or cash out following the stock's strong performance, having acquired his holding through his investment vehicle SEO in March at significantly lower prices.
