CH: Merchandise Trade Balance

Thu Feb 19 01:00:00 CST 2015

Actual Previous Revised
Trade Balance level CHf3.43B CHf1.52B CHf1.51B

The merchandise trade surplus widened out in line with the usual seasonal pattern at the start of the year. At CHF 3.43 billion the black ink was more than double December's minimally revised CHF1.51 billion but still slightly short of the CHF3.79 billion posted in November.

January's improvement reflected sharply weaker imports which were down some 6.1 percent on the year. Only part of this was due to the strength of the exchange rate as volumes also declined a hefty 4.1 percent. Exports were up 1.2 percent in nominal terms but 0.8 percent weaker in real terms.

Seasonally adjusted, cash exports rose 0.8 percent versus December and volumes were fully 2.9 percent stronger. On the same basis imports decreased 3.1 percent and 2.2 percent respectively.

The January data will have been impacted only very slightly by the dramatic appreciation of the local currency that occurred over the second half of the period. However, exchange rate effects should become much more apparent over coming months which promise to see the surplus initially grow further as prices adjust more quickly than volumes. However, the real trade balance is in danger of becoming a significant drag on economic growth during the course of 2015.

Merchandise trade measures the difference between the total value of Swiss exports and imports. Due to its small population and limited resources, foreign trade is very important for the Swiss economy and trade statistics can have a significant impact on markets. Imports may act as a drag on domestic growth and they may also increase competitive pressures on domestic producers. Exports boost domestic production. The focus is on the balance of trade in goods, excluding precious metals, gemstones, works of art and antiques. This is provided in unadjusted and workday adjusted measures for cash and volume. Seasonally adjusted monthly figures are not released so comparisons are usually made with reference to the year ago data.

Changes in the level of imports and exports along with the difference between the two (the trade balance) are a valuable gauge of economic trends here and abroad. While these trade figures can directly impact all financial markets, they primarily affect the value of the Swiss franc in the foreign exchange market. Switzerland's major trading partners include Germany, France, Italy and the United States. While Switzerland still exports large amounts of traditional products such as chocolate and watches, more than half of Swiss exports are in mechanical and electrical engineering and chemicals today. A positive trade balance indicates a trade surplus while a negative balance represents a trade deficit. Trade surpluses indicate that foreigners are buying more Swiss goods, which are typically paid for in Swiss Francs. This translates into greater demand for the currency and upward pressure on the value of the Franc. However, if the balance is a deficit, Swiss consumers are buying goods from trading partners which translates into higher demand for foreign currencies placing downward pressure on the value of the Franc.