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”. In the third quarter of 2016, the Swiss quarterly trade surplus rose over 10 bn. CHF for the first time in history. Exports rose by 8.1% and Imports by 7.9%.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. Changes in imports and exports are in line. This means that internal demand is in line with demand for exports. Charts from the Swiss customs data release (in French). Exports and Imports YoY Development In September 2016, Swiss exports were up 7.0% YoY (in real terms: + 1.
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George Dorgan considers the following as important: Featured, newslettersent, 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”.
In the third quarter of 2016, the Swiss quarterly trade surplus rose over 10 bn. CHF for the first time in history. Exports rose by 8.1% and Imports by 7.9%.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.
Changes in imports and exports are in line. This means that internal demand is in line with demand for exports.
Charts from the Swiss customs data release (in French).
Exports and Imports YoY DevelopmentIn September 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 ▲ Machinery and Electronic: first increase after nine quarters of decline ▲ record exports to the USA and Japan ▼ Sixth consecutive decline in watch exports ▼ Trade with the UK falters after Brexit. |
Swiss exports and imports, seasonally adjusted (in bn CHF) Source: Swiss Customs - Click to enlarge |
Sector findings▲ jewelry in the lead (+ 21% YoY) ▲ chemicals and pharmaceuticals +17% (3.4 billion CHF) mostly thanks to active ingredients and drugs ▲ precision instruments (instruments and medical devices) posted 8% increase ▲ the machinery and electronics group increased by 2% (+143 million) ▼ watch exports plunged 8% (minus 409 Mio).
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Switzerland Trade Balance(see more posts on Switzerland Trade Balance, ) Source: Investing.com - Click to enlarge |