by George Dorgan
My articles My siteAbout meMy booksMy videos
Follow on:TwitterFacebookGoogle +
CFA SocietySeeking Alpha
We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners. Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on the U.S. currency manipulation watch list. To
Topics:
George Dorgan considers the following as important: 2) Swiss and European Macro, 2.) Trade Balance News Service Bunt [FR], Featured, newsletter
This could be interesting, too:
Nachrichten Ticker - www.finanzen.ch writes Krypto-Ausblick 2025: Stehen Bitcoin, Ethereum & Co. vor einem Boom oder Einbruch?
Connor O'Keeffe writes The Establishment’s “Principles” Are Fake
Per Bylund writes Bitcoiners’ Guide to Austrian Economics
Ron Paul writes What Are We Doing in Syria?
We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.
Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on the U.S. currency manipulation watch list.
To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as GDP or consumption, then there is no such “savings effect”.
After the record trade surpluses, the Swiss economy may have turned around: consumption and imports are finally rising more than in 2015 and early 2016. In March the trade surplus got bigger again, still shy of the records in 2016.
Swiss National Bank wants to keep non-profitable sectors alive
Swiss exports are moving more and more toward higher value sectors: away from watches, jewelry and manufacturing towards chemicals and pharmaceuticals. With currency interventions, the SNB is trying to keep sectors alive, that would not survive without interventions.
At the same time, importers keep the currency gains of imported goods and return little to the consumer. This tendency is accentuated by the SNB, that makes the franc weaker.
Texts and Charts from the Swiss customs data release (translated from French).
| Exports continued their recovery in Q1 2021 with growth of 4.8%. On the rise for the third consecutive quarter, they have thus passed above their pre-pandemic level. Imports, for their part, increased by 1.7% compared to the last quarter of 2020. However, they were found to be lower by 3.8 billion francs at their level for the 4th quarter of 2019. The trade balance closes with a surplus of 11.3 billion francs.
In short ▲ Exports: machinery and electronics as well as metals continue to grow ▲ Watch exports: solid quarterly result ▲ Record exports to China ∨ Imports of passenger cars: -607 million francs |
Swiss exports and imports, seasonally adjusted (in bn CHF), Q1 2021 Source: newsd.admin.ch - Click to enlarge |
Global evolutionDuring the 1st quarter of 2021 and on a seasonally adjusted basis, exports increased by 4.8% (+ 2.7 billion francs; actual: + 4.9%), signing a third consecutive quarterly increase. At 58.1 billion francs, they not only exceeded their pre-crisis level, but also their second largest quarterly result. Imports increased by 1.7% or 805 million francs (actual: + 1.9%). However, they have stagnated since the 3rd quarter of 2020 and are still killing 3.8 billion francs below their level of the last quarter of 2019. The trade balance is buckling with a record quarterly surplus of 11.3 billion francs. |
Switzerland Trade Balance, March 2021(see more posts on Switzerland Trade Balance, ) Source: investing.com - Click to enlarge |
Second highest level for exportsThe export boom has been based mainly on four sectors; all have also recovered to their pre-crisis level. More than half of the growth was driven by chemicals and pharmaceuticals (+1.4 billion francs). Here, all segments grew, drugs in the lead (+1.2 billion francs). Exports of the machinery and electronics sector (+ 5.8%; +422 million) as well as those of metals (+ 9.3%; +299 million) continued to grow in the 1st quarter of 2021. Watch sales are also shined (+ 4.0% or +206 million); With a turnover of 5.3 billion francs, they are thus close to their quarterly performance for the years 2018/19. The vehicle sector has retreated (-8.2%), after having however been a hit the two previous quarters. In the first quarter of 2021, Swiss exports increased to all the main markets. Those to North America took the lift (+ 18.5%; chemistry-pharma). Sales in the USA swelled by 2.0 billion francs – or a fifth – to flirt with their record level of the 1st quarter of 2020. Towards Europe, they grew by 4.6% (+1.4 billion francs ) to 32.6 billion francs, thus exceeding their pre-crisis level. France and Spain gained a tenth against 7.5% for Germany. This trio alone explained 90% of the boom with the Old Continent. Shipments to Asia were up 2.6% (+338 million) which was broadly supported. China (+ 9.4%; + 372 million) stood out, posting a record level of 4.3 billion francs. |
Swiss Exports per Sector Q1 2021 vs. 2020 - Click to enlarge |
Imports: dynamism with neighboring countriesTwo thirds of the commodity groups saw their imports strengthen during the first quarter of 2021. The metals (+ 9.8%), jewelry and jewelry (+ 8.3%), machinery and electronics (+ 7.7%) sectors have the most Supported growth, representing a cumulative increase of 1.2 billion francs. The last mentioned crossed, for the first time since the second quarter of 2019, the mark of 8 billion francs. Imports of vehicles (-13.4%; passenger cars: -607 million francs) and chemicals and pharmaceuticals (-1.0%), on the other hand, fell. In the latter, the decline in active ingredients as well as immunological products contrasted with the rise in drugs. Imports from Asia (+ 2.2%) and Europe (+ 1.2%) gained ground while those from North America showed their fourth decline in five quarters (-2.8%). On the Asian side, Singapore, the United Arab Emirates and China shone, accumulating a total increase of 770 million francs. The first has also raised a record level. After hitting bottom in the second quarter of 2020, arrivals from Europes have since been trending positively. In the 1st quarter of 2021, Germany made the strongest contribution to growth (+668 million francs). France, Spain, Italy and Austria were not to be outdone, this quartet generating an increase of 436 million francs. |
Swiss Imports per Sector Q1 2021 vs. 2020 - Click to enlarge |
You Might Also Like
Weekly SNB Sight Deposits and Speculative Positions: SNB buying euros at high prices
2021-04-19
Update April 19 2021: SNB intervening. Sight Deposits have risen by +0.2 bn CHF, this means that the SNB is intervening and buying Euros and Dollars: The change is +0.2 bn. compared to last week.
Swiss Trade Balance: 2020 salt exports: lowest in 30 years
2021-03-09
Swiss foreign trade in salt has plummeted since 2010. Over the past ten years, exports have plunged 91% to 6,084 tonnes and imports by 69%. In 2019 and 2020, the amount of salt imported was greater than that exported, a phenomenon that had not occurred since 2009.
Swiss Trade Balance An exceptional year 2020: border crossings closed and online commerce booming
2021-03-04
Bern, 04.03.2021 – The 2020 statistics of the Federal Customs Administration (AFD) are strongly influenced by the COVID-19 pandemic. In order to reduce the risk of transmission of the coronavirus, Switzerland has reintroduced systematic checks at national borders for the first time since joining Schengen, imposed entry restrictions and temporarily closed small border posts.
Swiss Trade Balance January 2021: foreign trade starts the year on a positive note
2021-02-18
After declining in December 2020, Swiss foreign trade again showed a strong increase at the start of 2021. In January and in seasonally adjusted terms, exports rose 5.4% to 18.9 billion francs and imports by 3.3% to 15.3 billion. In both directions of trafficking, the boom relied heavily on chemicals and pharmaceuticals. The trade balance closed with a surplus of 3.6 billion francs.
Swiss Trade Balance Foreign trade 2020: historic decline against the backdrop of a pandemic
2021-01-28
Switzerland’s 2020 foreign trade will bear the brunt of the consequences of the COVID-19 pandemic: exports (-7.1% to 225.1 billion francs) and imports (-11.2% to 182.1 billion) posted a historic decline. Never before have they suffered such a significant quarterly decline as in the second quarter of 2020. Foreign trade has fallen back to its level recorded three years earlier. The trade balance closed the year with a record surplus of CHF 43.0 billion.
Swiss Trade Balance November 2020: exports are on the rise
2020-12-17
In November 2020, Swiss foreign trade stood out with an increase in both directions of traffic. In seasonally adjusted terms, exports advanced 4.8% and imports 4.2%. Falling over the previous two months, exports resumed their growth path and the trade balance closed with a surplus of 3.1 billion francs.
Swiss Trade Balance October 2020: foreign trade falters
2020-11-19
In October 2020, Swiss foreign trade took off. In seasonally adjusted terms, exports stagnated (-0.4%) while imports fell 3.3%. The slowdown recorded since this summer in both directions of traffic has thus been confirmed. The trade balance closed with a surplus of 2.9 billion francs.
Swiss Retail Sales, September 2020: 0.3 percent Nominal and 0.3 percent Real
2020-10-30
30.10.2020 – Turnover adjusted for sales days and holidays rose in the retail sector by 0.3% in nominal terms in September 2020 compared with the previous year. Seasonally adjusted, nominal turnover fell by 3.6% compared with the previous month.
Tags: Featured,newsletter