Growth was primarily driven by manufacturing, which benefited from  Page 2/4  Berne, 14 December 2017 Thomas Jordan  News conference  dynamic global economic developments and the weaker Swiss franc. Accordingly, exports recorded marked gains. Investment in equipment also grew noticeably. In the wake of this development, capacity utilisation in manufacturing increased further. The overall economic situation improved, too. Higher capacity utilisation, a more robust earnings situation and favourable global economic prospects contributed to a further rise in business confidence. These factors generally strengthen the willingness to invest. The gradual recovery on the labour market has also continued. The unemployment rate declined again slightly through to November. The demand for labour among companies has gradually picked up. Due to continued pressure on prices and costs, however, businesses are only cautiously increasing their headcounts. Employment growth is therefore likely to remain moderate. Given the supportive global environment and favourable monetary conditions, the recovery in the Swiss economy looks set to continue in the coming months. For 2018, we expect GDP growth of around 2%, following 1% in 2017. Compared to the current year, 2018 should be characterised by stronger growth stimuli mainly from exports and corporate investment. Inflation expectations, interest rates and exchange rates  I will now review changes in inflation expectations and monetary conditions. Inflation expectations for Switzerland have remained practically unchanged over the past half year. Households and companies still expect low inflation of around 0.5% in the short term. In the longer term, expectations lie at approximately 1%.

This is especially the case in times of heightened uncertainty. Competitiveness and the strong Swiss franc But aren’t these two consequences of a stability-oriented economic policy at odds with each other? Or, to put it another way: does a strong franc really lead to a reduction in competitiveness? It is essential to differentiate between the short and long-term impact of a strong currency on competitiveness, and it is these differences which I will now examine in the second part of my remarks. In the short term, the answer is obvious: an appreciation makes Swiss companies less competitive on prices than their foreign rivals (cf. chart 8). It becomes harder for them to sell their products and services at a price that covers the costs involved. The increased pressure on margins forces many companies to make adjustments. Without a doubt, these adjustments are painful and require a high degree of innovative thinking, a willingness to take risks and flexibility, from both employers and employees. If need be, companies may have to withdraw  1  The Global Innovation Index is published by Cornell University, INSEAD and the World Intellectual Property Organization (WIPO), and covers 143 countries. The Innovation Union Scoreboard is a European Commission tool for evaluating the innovation performance of EU member states and other European countries such as Switzerland. 2  As part of its mandate, the SNB must also contribute to the stability of the financial system. A well-functioning system of bank lending is also an important pillar of macroeconomic stability.