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:
Marc Chandler writes Sterling and Gilts Pressed Lower by Firmer CPI
Ryan McMaken writes A Free-Market Guide to Trump’s Immigration Crackdown
Wanjiru Njoya writes Post-Election Prospects for Ending DEI
Swiss Customs writes Octobre 2024 : la chimie-pharma détermine le record à l’export
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).
| In October 2021, Swiss foreign trade lost its vigor. Exports declined 1.4% and imports 2.3% from the previous month. The chemicals and pharmaceuticals sector weighed on the result in both directions of traffic. The trade balance closed with a surplus of 4.4 billion francs, similar to that of previous months.
In short ⇑ Watch exports continue their momentum ⇑ Increase in exports to Europe ⇑ Trade in jewelry and jewelry takes the lift ⇓ Exports to the US fall for the second month in a row |
Swiss exports and imports, seasonally adjusted (in bn CHF), October 2021 - Click to enlarge |
Global evolutionIn October 2021, seasonally adjusted exports fell 1.4% (actual: -1.5%), after stagnating in September. Overall, they remain on a positive trend, albeit slower. Imports fell 2.3% over one month (actual: -4.4%). These have stagnated since April. The trade balance closes with a surplus of 4.4 billion francs. |
Switzerland Trade Balance, October 2021(see more posts on Switzerland Trade Balance, ) Source: investing.com - Click to enlarge |
Exports: immunological products plunge by 613 million francsIn October 2021 for exports, a third of the groups of goods declined and two thirds increased. Among the losers, the flagship group, chemicals and pharmaceuticals, fell 2.8% (-317 million francs), weighing heavily on the overall result. The immunologics segment in particular fell by a sixth (-613 million). Among the winners, the jewelry and jewelry business with a jump of 233 million francs. Watch sales also continued to grow (+ 2.2% or +43 million). Of the top three markets, only North America declined (-10.1%). Here, the USA fell by 411 million francs (chemistry-pharma); after taking off in August, this partner shows a second consecutive monthly decline. Exports to Asia have generally stagnated. Sales to Saudi Arabia and Hong Kong took off as sales to China fell 3.4%. Towards Europe, turnover increased by 3.3% or 404 million francs. This increase was mainly rooted in Spain and the Netherlands, which posted cumulative growth of 231 million francs. |
Swiss Exports per Sector October 2021 vs. 2020 - Click to enlarge |
North American imports increase by one tenthAt the start, the fall of more than half a billion francs in chemicals and pharmaceuticals (-11.4%) had a major impact on the result. Medicines as well as immunological products have suffered serious setbacks. Vehicle imports also suffered (-142 million francs; primarily aeronautics). Conversely, jewelry and jewelry making stood out (+ 18.3%), reaching its highest level since March 2020. The textiles, clothing and footwear sectors as well as energy products increased, but to a lesser extent. For the latter, the increase was only due to the price effect. A disparate pattern characterized the three main supply markets: imports from Europe and Asia fell by 4.4% and 0.7% respectively, while those from North America swelled by a tenth. However, the latter had fallen by almost as much the previous month. On the European side, the fall of 373 million francs from Germany and Ireland pulled the continental result into the red numbers. With the Asian partner, the rise in China and the United Arab Emirates (jewelry and jewelry) contrasted with the similar decline in Singapore and Japan. |
Swiss Imports per Sector October 2021 vs. 2020 - Click to enlarge |
You Might Also Like
Weekly View – Central Bank Halloween
2021-11-02
Last week, the US GDP growth figure for Q3 came in lower than expected, while prices moved higher than anticipated and the US Employment Cost Index update rose at its fastest pace in 31 years. The headline increase was driven by the biggest surge in wages since 1982, up 1.5% in the third quarter.
House View, October 2021
2021-10-05
We maintain our tactically neutral position on equities, with the notable exception of Japan, where we see scope for a re-start to Abenomics and for Japanese stocks to continue to close their performance gap with their peers in other developed markets.
Swiss Retail Sales, June 2021: -0.4 percent Nominal and +0.1 percent Real
2021-08-02
Turnover adjusted for sales days and holidays fell in the retail sector by 0.4% in nominal terms in June 2021 compared with the previous year. Seasonally adjusted, nominal turnover fell by 3.6% compared with the previous month.
Swiss Trade Balance Q2 2021: export record
2021-07-20
Swiss foreign trade showed dynamism in the second quarter of 2021. Exports rose 3.2% to a record level. They posted a fourth consecutive quarterly increase since the drop recorded at the start of the coronavirus pandemic. Imports continued the momentum of the previous quarter and increased 3.8%. The trade surplus stood at 11.5 billion francs.
Swiss Producer and Import Price Index in May 2021: +3.2 percent YoY, +0.8 percent MoM
2021-06-14
The Producer and Import Price Index increased in May 2021 by 0.8% compared with the previous month, reaching 102.4 points (December 2020 = 100). In particular, higher prices were seen for chemical products, rubber and plastic products, basic metals, semi-finished metal products and pharmaceutical products
Swiss Trade Balance April 2021: Exports Stagnate at a High Level
2021-05-27
After jumping 5.9% in March, exports stagnated in April, however, rising to a high level of 20 billion francs. Imports confirmed their vitality in previous months, up 3.5% to 16.8 billion francs (actual: + 2.2%). The trade balance closes with a surplus of 3.3 billion francs.
Tags: Featured,newsletter