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 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 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 DevelopmentIn October 2020, Switzerland’s foreign trade took a turn for the worse. In seasonally adjusted terms, exports stagnated (-0.4%) while imports fell 3.3%. The slowdown recorded since this summer in both traffic directions has thus been confirmed. The trade balance has closed with a surplus of 2.9 billion francs. In short ▼ Chemistry-pharma: red numbers at entry and exit ▼ Decline in exports to North America and Asia ▲ Imports of passenger cars: highest level for the current year ▲ Exports: growth continues for watchmaking, machinery and electronics as well as metals |
Swiss exports and imports, seasonally adjusted (in bn CHF), October 2020(see more posts on Switzerland Exports, Switzerland Imports, ) - Click to enlarge |
Global evolutionIn October 2020, seasonally adjusted exports stagnated at 17.8 billion francs (-0.4%; actual: -0.5%). After their strong recovery between June and August, they experienced a second consecutive monthly decline. Imports fell 3.3% (actual: -3.4%) after having increased by the same amount the previous month. They thus contracted by 513 million to stand at 14.9 billion francs, stagnating since July. The trade balance showed a surplus of 2.9 billion francs. |
Switzerland Trade Balance, October 2020(see more posts on Switzerland Trade Balance, ) . |
Drug exports: fall of half a billion francs over one monthHalf of the exporting sectors saw the ground in October 2020. Chemicals and pharmaceuticals as well as precision instruments were the main vectors of the exit decline. The former fell by 1.8%, weighed down by the contraction of drugs (-484 million francs). As for the latter, they fell 4.4% but continue to show a positive trend. Conversely, sales of jewelry and jewelry (other merchandise) jumped 11.3%, after their plunge the previous month. Watchmaking (+ 4.1%), the machinery and electronics sector (+ 3.3%) and metals (+ 2%) continued to grow. The development of exports proved to be constrained in the main markets. They fell by 4.1% with North America (USA: -3.1%) and by 0.8% with Asia. In Europe, on the other hand, they increased by 2.2%, confirming their progression of the previous months. On the Asian side, sales to China fell by 27.7% (-334 million francs), after increasing by a fifth of the month. previous. The boom in Hong Kong (+ 46.2%) and Japan (+ 7.5%), however, mitigated the overall decline. On the Old Continent, Germany (+90 million), Austria (+78 million) and Belgium (+77 million) made the strongest contributions to growth. Conversely, the Netherlands suffered a setback of 109 million francs. |
Swiss Exports per Sector October 2020 vs. 2019(see more posts on Switzerland Exports, Switzerland Exports by Sector, ) - Click to enlarge |
Press release 3/4 Imports from North America: -6.6%The drop at entry is mainly explained by the contraction in chemical and pharmaceutical products (-235 million francs) and vehicles (-215 million). However, these two sectors had posted a double-digit increase in September 2020. The downturn in chemicals and pharmaceuticals was largely due to the decline in imports of immunological products (-265 million). In the vehicle sector, the decline in aeronautics contrasted with the increase – which began in May – in passenger cars. The textiles, clothing and footwear sectors (group other goods) as well as machinery and electronics have, for their part, evolved on the right side of the bar. With the exception of Asia, imports lost ground from all continents, with North America (-6.6%; Canada: -55.3%) and Europe (-0.7%) in particular. weighed on the evolution at entry. Germany (-170 million francs) and Ireland (-93 million) notably pulled the European result down. Conversely, arrivals from Asia showed an increase (+ 0.8%). This is mainly based on Singapore and China; on the other hand, deliveries from Japan fell by 86 million francs. |
Swiss Imports per Sector October 2020 vs. 2019(see more posts on Switzerland Imports, Switzerland Imports by Sector, ) - Click to enlarge |
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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 May 2020: signs of recovery in foreign trade
After 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.
Swiss Trade Balance Q2 2020: historic decline in exports and imports
Swiss foreign trade recorded a record decline in the second quarter of 2020. In seasonally adjusted terms, exports plunged by 11.5% compared to the previous quarter and imports even by 16.0%. This result stems from the traffic collapse recorded in April in the wake of the coronavirus pandemic, with May and June having regained some color. The trade balance closed with a record surplus of 9.6 billion francs.
Swiss Trade Balance Q3 2020: foreign trade regains color
After its historic decline in the second quarter, Swiss foreign trade showed a clear recovery in the third quarter of 2020. In seasonally adjusted terms, exports swelled by 6.5% and imports by 11.5%. The two traffic departments, however, remained well below their record level for the second quarter of 2019. The trade balance closed with a surplus of 8.2 billion francs.
House View, October 2020
Rising coronavirus cases accompanied by flagging recovery momentum and a fractious run-up to the US elections make prospects for equities highly reliant on 3Q results and further policy stimulus. Against this background we have downgraded our stance on euro area equities from neutral to underweight, following a similar downgrade for US equities in August.
Swiss labor force survey in the 2nd quarter of 2020: labor supply
The number of employed persons in Switzerland fell by 1.6% (–82 000) between the 2nd quarter 2019 and the 2nd quarter 2020. Furthermore, the actual weekly hours per employed person declined by 9.5%.
Swiss Retail Sales, July 2020: 3.4 percent Nominal and 4.1 percent Real
Turnover adjusted for sales days and holidays rose in the retail sector by 3.4% in nominal terms in July 2020 compared with the previous year. Seasonally adjusted, nominal turnover rose by 0.7% compared with the previous month.
Swiss Consumer sentiment: No further recovery of consumer sentiment
Consumer sentiment in Switzerland has largely been stagnating since the summer. All sub-indices used for the calculation are still below their long-term average and none have improved significantly compared to this summer’s survey. Economic development and the situation on the labour market are seen as unfavourable.
Download press release
No further recovery of consumer sentiment(PDF, 2 pages, 417 kB)
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Associated documents
Consumer Confidence: Results of the October 2020
Tags: Featured,newsletter,Switzerland Exports,Switzerland Imports,Switzerland Trade Balance