ZURICH, Dec 15 (Reuters) - Swiss input prices posted the sharpest monthly drop in over 33 years in November as companies' oil and commodities costs slumped, highlighting the risk of deflation for the Swiss economy.
The combined producer and import price index dropped 1.4 percent in November from the previous month, taking the annual inflation rate to just 1.1 percent from 2.9 percent in October, the Federal Statistics Office said on Monday.
That was the largest month-on-month drop since March 1975, a spokesman for the office said.
Economists had only expected a 0.6 percent fall on the month
and a yearly rate of 1.9 percent.
"The outcome certainly increases the risk of deflation, both at the producer and consumer price level," 4Cast analyst Saara Tuuli said, adding, however, that the risk of a deflationary spiral was still minimal given positive inflation expectations.
SNB Chairman Jean-Pierre Roth said last week Switzerland should escape deflation despite the recession it faces.
"The SNB now has little manoeuvre on rates but other unorthodox measures are likely to be on the cards next year," 4Cast's Tuuli said.
The SNB said it could intervene in the foreign exchange market to weaken the Swiss franc or buy government bonds should such measures to ease monetary conditions become necessary.
Consumer price inflation eased to an annual rate of 1.5 percent in November, falling below the SNB's 2-percent threshold for price stability for the first time this year.
The driver behind the sharp input price drop was a 3.4-percent fall in import prices, also the strongest monthly decline since March 1975.
Import costs fell by 1.0 percent compared to November 2007, the first year-on-year decline in over four years. Commodity prices fell 12.3 percent on the year while prices for mineral oil products eased 5.8 percent.
Producer prices fell 0.4 percent on the year, taking the annual inflation rate to 2.2 percent. (Reporting by Sven Egenter, editing by Mike Peacock)