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 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
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George Dorgan considers the following as important: 2) Swiss and European Macro, 2.) Trade Balance News Service Bunt [FR], Featured, newsletter, Switzerland Exports, Switzerland Exports by Sector, Switzerland Imports, Switzerland Imports by Sector, 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 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 and Imports YoY DevelopmentAfter its historic setback of the previous month, foreign trade recovered a few colors in May 2020. Imports posted a seasonally adjusted increase of 9.8% to 13.6 billion francs; however, they are still below their March 2020 level. Although exports fell again (-1.2%), they eased compared to April. The trade balance closed with a surplus of 2.8 billion francs. In short ▲ Increase in trade with Europe ▲ Watchmaking: exports have doubled, but remain at a low level ▼ Chemistry-pharma: decline in both directions of traffic |
Swiss exports and imports, seasonally adjusted (in bn CHF), May 2020(see more posts on Switzerland Exports, Switzerland Imports, ) - Click to enlarge |
Global evolutionIn May 2020, exports registered a further decline (-1.2%; real: -0.2%), which however was less virulent than the previous month. Exports contracted from 201 million francs to 16.4 billion francs. For their part, imports rebounded clearly after their historic plunge of the previous month. They indeed increased by 9.8% (+1.2 billion francs; real: + 13.0%), however, settling at a level (13.6 billion francs) still significantly lower than that of March 2020 The trade balance closed with a surplus of 2.8 billion francs. |
Switzerland Trade Balance, May 2020(see more posts on Switzerland Trade Balance, ) Source: investing.com - Click to enlarge |
Third consecutive monthly decline in exports to Asia
In May 2020, the three main export sectors, namely chemicals and pharmaceuticals, machinery and electronics and precision instruments, fell again. Chemicals and pharmaceuticals (immunological products: -688 million francs) weighed the most on the result. Since the start of the year, their exports have stagnated. The machine and electronics sectors as well as precision instruments continued to develop negatively, albeit at a slower pace compared to the previous month (respectively -31 and -30 million francs). Watchmaking exports doubled in one month (+345 million), nevertheless showing a level half of that of March. Metals also rebounded (+12 million; other merchandise group), but more timidly than watchmaking. Among the three largest drainage markets, only Europe (+ 2.7%) experienced growth. This was mainly based on the boom in sales to Germany (+205 million francs), Italy and France still posting red figures (-156 and -90 million respectively). Exports to North America weakened further, however more moderately (-3.3%; USA: -93 million). The Asian continent suffered its third consecutive contraction (-13.9%). This mainly results from the setbacks of China, Japan and Singapore (-337 million in total). |
Swiss Exports per Sector May 2020 vs. 2019(see more posts on Switzerland Exports, Switzerland Exports by Sector, ) - Click to enlarge |
Imports: broadly sustained rebound
On the import side, ten of the top twelve commodity groups posted increases. Three sectors alone generated three quarters of the growth (+1.2 billion francs). Vehicle imports increased for the first time in four months (+374 million francs; passenger cars: +215 million). Machinery and electronics were also on the rise (+216 million), returning to their March 2020 level. With a jump of a third or 302 million francs, the textiles, clothing and footwear sector posted higher growth in the previous month. Chemicals and pharmaceuticals fell further (-77 million), but were more tenuous than in April. This drop is explained by the decline in raw materials and basic materials (-96 million). Entry growth took root in Europe (+ 11.6%) and Asia (+ 13.2%). After the fall of the previous month, imports from our four neighboring countries increased, on a cumulative basis, by 781 million francs. Spain also shone (+112 million francs). Arrivals from Asia have returned to their level at the start of the year. China stood out with a boom of 188 million francs, reaching a new monthly peak at 1.6 billion francs. Viet Nam has doubled its deliveries over a month (+122 million; gold ornaments for redesign). North America recorded a new setback (-12.4%; USA: -84 million). |
Swiss Imports per Sector May 2020 vs. 2019(see more posts on Switzerland Imports, Switzerland Imports by Sector, ) - Click to enlarge |
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Despite a climate of uncertainty linked to trade tensions and the global economy, Swiss foreign trade grew in 2019, albeit at a slower pace. Exports increased by 3.9% to 242.3 billion francs while imports increased by 1.6% to 205.0 billion francs, the two directions of traffic thus reaching an historic peak. The trade balance closed with a record surplus of 37.3 billion francs.
Swiss Trade Balance Q1 2020 : chemistry-pharma keeps exports in black numbers
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Swiss Trade Balance April 2020: foreign trade collapses
Compared with the previous month, April 2020 exports contracted by 11.7% (actual: -10.0%); this is the largest seasonally adjusted decline ever recorded. They retracted by 2.2 billion to reach 16.7 billion francs. Imports even plunged by 21.9%, that is, by a drop of 3.5 billion francs, to 12.4 billion francs (actual: -17.8%); they thus fell almost to their July 2005 level. The trade balance closed with a record monthly surplus of 4.3 billion francs.
Swiss Trade Balance Q4 2019: Secondary sector shows positive growth rates again
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Weekly View – Reality check
The short-term pull-back in stock prices last week on the back of persistent virus concerns in the US and elsewhere shows the market remains jittery despite the massive run-up in prices since late March. May data from China showed a relatively fast rebound on the supply side of the economy, but a much slower take-off in consumption, suggesting a ‘reverse square root’ kind of recovery for economies rather than the ‘v’-shaped one markets have been pricing.
Supplementary accommodation: 0.7 percent increase in overnight stays in 2019, but decrease in demand for holiday homes
15.06.2020 – In 2019, supplementary accommodation posted a total of 16.7 million overnight stays, i.e. an increase of 0.7% compared with 2018. With 11.4 million units, Swiss visitors represented more than two-thirds of demand (68.6%), i.e. a rise of 2.4%. Foreign visitors registered a 2.8% decrease with 5.2 million units. With 4.4 million overnight stays (-3.8%), European visitors accounted for the majority of stays by foreign guests.
Swiss Producer and Import Price Index in May 2020: -4.5 percent YoY, -0.5 percent MoM
15.06.2020 – The Producer and Import Price Index fell in May 2020 by 0.5% compared with the previous month, reaching 97.6 points (December 2015 = 100). This decline is due in particular to lower prices for pharmaceutical and chemical products as well as for petroleum products. Compared with May 2019, the price level of the whole range of domestic and imported products fell by 4.5%.
Expats in Switzerland need even deeper pockets
Three Swiss cities – Zurich, Bern and Geneva – are among the ten most expensive in the world for expatriates, according to the annual Cost of Living survey by consultants Mercer. Hong Kong remains at the top of the list of 209 countries for the third year in a row. Six of the top ten are in Asia, three in Switzerland and one in the United States.
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