by George Dorgan
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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 increases, while REER assumes constant productivity in comparison to trade partners. On the other side, a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. 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”. The Swiss trade balance in August looks extremely healthy: Swiss exports were up 7.0% against August 2015 (in real terms: + 1.2%) and imports 8.4% (in real terms: + 5.1%).Apparently imports increased because there is more export demand, but not because locals decided to consume more. Exporters could even raise prices, as we see in the difference between nominal and real. The difference between nominal and real reflect the fact that in particular pharmaceuticals and chemical exporters could increase their prices in Swiss Franc. Charts from the Charts from the Swiss customs data release (in French). Exports and Imports YoY Development In August 2016, Swiss exports were up 7.
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George Dorgan considers the following as important: Featured, newsletter, Swiss Macro, Switzerland Exports, Switzerland Imports, Switzerland Trade Balance
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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 increases, while REER assumes constant productivity in comparison to trade partners.
On the other side, a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. 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”.
The Swiss trade balance in August looks extremely healthy: Swiss exports were up 7.0% against August 2015 (in real terms: + 1.2%) and imports 8.4% (in real terms: + 5.1%).
Apparently imports increased because there is more export demand, but not because locals decided to consume more.
Exporters could even raise prices, as we see in the difference between nominal and real. The difference between nominal and real reflect the fact that in particular pharmaceuticals and chemical exporters could increase their prices in Swiss Franc.
Charts from the
Charts from the Swiss customs data release (in French).
Exports and Imports YoY DevelopmentIn August 2016, Swiss exports were up 7.0% YoY (in real terms: + 1.2%) and imports 8.4% YoY (in real terms: + 5.1%). In short ▲ Chemical-pharma: dynamism in both directions ▲ Rise of 22% in exports to North America and 10% to Europe ▼ drop in watch exports as well as in the machinery and electronics sector |
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Sector findingsIn August 2016, the various sectors had different tendencies: In chemical and pharmaceutical sector(1.5 billion francs real: + 13%) the following products changed against August last year:
Sales of precision instruments (medical instruments and appliances) rose 3%. The machinery and electronics sector has suffered a decline of 6% (-135 millions). For example, the sales of vehicles have also slowed (-167 millions). |
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