Geneva (dpa) – Who in Germany groans under rising energy and food prices rubs his eyes when he looks at Switzerland: electricity, bread, vegetables – everything almost as usual.
Consumer prices rose by just 3.4 percent year-on-year in June. For Switzerland, this is the highest rate since 1993. According to preliminary estimates, however, it was as much as 7.6 percent. in Germany, and even 8.6 percent. in the euro area.
Inflation is calculated in a slightly different way in Switzerland than in the euro area. However, for better comparability, the Swiss also provide the Eurozone’s customary Harmonized Index of Consumer Prices (HICP), which was even lower in June at 3.2%. So can the Swiss be envied?
You may think so. First, the currency is strong. “If the Swiss Franc appreciates, imports will become cheaper for consumers,” says Alexander Rathke of the ETH University’s Center for Economic Research. However, this effect explains at most one percentage point of the inflation difference. In fact, in times of crisis, when prices are rising sharply around the world, the Swiss benefit from high import duties on food and agricultural products, and electricity and gas price controls.
While food prices in the euro area and the US rose by around ten percent year-on-year, in Switzerland they were almost stable. “Protectionist measures keep food prices in Switzerland separate from changes in the world market,” says Maxime Botteron, an analyst at Credit Suisse Bank.
The Swiss are raising the prices of foreign agricultural products, which are also produced domestically, to a higher Swiss level through import duties to protect domestic grain, fruit and vegetable farmers from foreign competition. “If the price for the goods we make rises in the world market, only the tariffs will fall,” says Rathke.
High price level
However, the Swiss also pay a high price in a non-crisis era: “Prices are more stable now, but the price level is always higher in other respects,” says Rathke. For food that costs ten euros in neighboring countries, Switzerland has to pay the equivalent of 18 euros.
As the harvest in Switzerland was poor in 2021 and then the missing grain, fruit and vegetables could be imported without high import duties, there were even opportunities: “As tomatoes from Spain and other food from abroad are cheaper, prices dropped,” says Botteron .
Switzerland covers almost all of its electricity needs from hydropower and nuclear power, while in Germany a lot of electricity is generated from gas. Switzerland only needs to import electricity in winter when higher European prices may be affected. But consumers don’t realize it right away, says Botteron, because utilities typically set a price once a year. “It delays the inflation effect.”
In addition, the shopping baskets used to calculate inflation differ. They are based on how much, on average, people in a given country spend on a given product category. In the Swiss shopping basket, energy components such as oil, electricity and gas account for just five percent, while in Germany it is almost ten percent and in the US it is seven percent. Therefore, the rise in prices in the world oil and gas market is not causing such a large increase in inflation in Switzerland.
The same goes for food. In Switzerland, their share in a typical shopping basket is 11.5%, in the USA 13%, and in the euro area 15%. “The richer people are, the less they spend on food,” says Rathke. In turn, in the Swiss consumer price index, healthcare accounts for almost 17 percent, while in the US it is only about 8.5 percent. and about 5 percent in the euro area.
Finally, there are structural reasons for the lower rate of inflation: prices in Switzerland tend to fall, especially for medicines, but also for furniture and clothing, or at least not rising as much as in the euro area. This is partly because e-commerce is putting pressure on domestic traders, says Botteron, “There is a tendency to align with price levels in the euro area.” “Extremely high value,” says Rathke.