UPDATE 1-Outlook for Swiss industry darkens in September
* Sept PMI at 43.6 vs forecast of 47.5
* Below growth mark for sixth month running
* Lowest reading since June 2009
(Adds analyst comment, background)
By Catherine Bosley
ZURICH, Oct 1 (Reuters) - The outlook for Swiss industry darkened further in September, highlighting the risk of a recession due to sluggish growth in the euro zone and the United States and reinforcing the need for the central bank's cap on the strong franc.
The Swiss purchasing managers' index fell to a seasonally adjusted 43.6 points in September, its lowest since June 2009, from 46.7 the previous month, well short of the 47.5 forecast by analysts in a Reuters poll.
It was the sixth month running below the 50 mark that signals a contraction.
"Switzerland can't stay unscathed by the global economic slowdown," said Sarasin currency strategist Ursina Kubli. "We think Switzerland will be spared a recession but the risks remain."
The Swiss economy, which earns every second franc abroad, had shown resilience in the face of the euro zone debt crisis but it contracted in the second quarter, and economic indicators such as the ZEW investor sentiment index paint an increasingly gloomy picture.
That supports the justification for the Swiss National Bank to retain the cap it imposed on the Swiss franc of 1.20 per euro a year ago to ward off a recession.
"A technical recession in Switzerland is being confirmed, I'd say we're shaping up for three negative quarters rather than two," said Julius Baer chief economist Janwillem Acket.
Economy Minister Johann Schneider-Amman said in a newspaper interview on Sunday that exporters needed the central bank to continue to defend its cap, even if they had become more efficient in the last year.
SIMILARLY DOUR ELSEWHERE
Data out on Monday showed the manufacturing sector in Germany, Europe's largest economy and Switzerland's biggest trading partner, shrank for a seventh month running.
The PMI index for Switzerland is compiled by the Swiss SVME purchasing managers' association and Credit Suisse.
Market tensions stemming from the euro zone crisis eased last month following the European Central Bank's (ECB) promise to buy the bonds of some troubled member states. But worries about a Spanish bailout have re-emerged in recent days.
"Recent hopes that the two-pronged monetary approach in the U.S. and Europe would result in an early resolution of the debt crisis have not - yet - filtered through to the current PMI survey," the authors said.
Domestic demand - including private consumption - has stayed robust despite the headwinds due to the strong currency that export-oriented sectors are facing.
Swiss retail sales rose 5.9 percent in August in real terms versus the year-earlier month, data showed on Monday.
But in a sign even that even domestic demand may be softening, consumer sentiment slipped farther into negative territory in the third quarter.
Even the KOF barometer, which points to the economy's expected state in half a year's time and has been generally more upbeat, also indicates momentum will wane, though its authors say the economic outlook remains positive.
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(Additional reporting by Martin de Sa'Pinto and Emma Thomasson; Editing by Stephen Nisbet)
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Keywords: MANUFACTURING PMI/SWISS