Deflation Bonanza! (And The Fool’s Mission To Stop It)

Of all the widely believed but patently false economic beliefs is the absurd notion that falling consumer prices are bad for the economy and something must be done about them.

The recent move in the Swiss franc puts a spotlight on the issue. For example, on Sunday, in Swiss Peg Removal: Did Anyone Win? I commented … 

 One widely recognized “big loser” is the tourism industry. For sure, hotel prices in Switzerland rose as much as 40% overnight compared to prices elsewhere.

But Swiss grocery shoppers buying food imports from France, Spain, and the rest of Europe benefit mightily.

Which of those is more important? I suggest the benefit to Swiss shoppers is more important, at least in the grand scheme of things. Moreover, those consumers will have more money to spend on other things … like restaurants, travel and hotels.

Shopping Bonanza!

On Monday came a Wall Street Journal story that exactly matched my prediction: Soaring Franc Creates Bonanza in Swiss Stores. 

 The soaring Swiss franc that caused howls in financial markets is creating a bonanza in stores, where shoppers are suddenly getting discounts on everything from vegetables to party dresses.

On Monday, Basel-based Coop said it was cutting prices on more than 200 types of fruit and vegetables imported from the European Union. The supermarket chain, Switzerland’s second-largest retailer behind Migros, said further price cuts for imported fish, poultry and cheese were also in the works.

Coop isn’t the only retailer going into bargain mode. Furniture chains, travel agencies and fashion companies are among the retailers slashing prices to rope in shoppers. 

“For us housewives, this is welcome news for our daily shopping,” said Anita Mueller, who was perusing sales on Banhofstrasse, Zurich’s main thoroughfare, on Monday morning.

Even luxury stores are passing on the savings. The window of Grieder & Cie., a high-end department store in Zurich’s shopping district, bore a message informing shoppers their money would go further.

“Due to the sudden rise of the Swiss franc against the euro and to give us time to adjust our prices to the move, we are now offering a 20% discount on all of our non-reduced goods for an indefinite time,” the message read.

Swiss consumers are also taking advantage of their improved buying power by crossing into Germany. BVB, the transportation authority in Basel, added more trams to the border town of Weil am Rhein to accommodate the rush of Swiss bargain hunters looking to take advantage of their muscular Swiss francs.

TUI Suisse, one of Switzerland’s biggest tour operators, cut prices by 15% on vacation packages to sunny destinations around Mediterranean Sea. Tours of Greece, Spain, Turkey, Italy and Portugal are all included in the sale, which is dubbed the “euro discount.” TUI Suisse, which has branches in many shopping malls across Switzerland, is also lowering prices on trips to Morocco and Egypt for departures through the summer.