According to the new SECO consumer climate survey, household confidence surprisingly improved last month. At minus 6 the overall sentiment measure was up 5 points versus its October reading, still its second weakest print since July 2013 but its first increase in four months.
However, the timing of the survey means that slightly more than 75 percent of responses were recorded before the SNB pulled the plug on its minimum exchange rate target policy on 15th January. Significantly, while this group put the headline index at minus 3, those replies received after the policy switch yielded a much weaker minus 17, the worst outcome since October 2012.
Accordingly the more detailed survey results need to be treated with care. That said, one point that is very clear is a sharp downgrading to inflation expectations. The sub-index here dropped some 24 points to 29, its lowest reading in three years. Presumably if the same question were to be posed now the results would be even weaker.
The bottom line is that today's survey needs to be treated with care and it will take a while yet before the effects of the SNB's actions on household behaviour and on the economy in general become fully apparent.
SECO Consumer Climate compiles a quarterly survey of consumer attitudes on present economic conditions and expectations of future conditions. The survey covers around 1,200 Swiss households and results are synthesised into a single summary index that attempts to measure consumer sentiment.
The pattern in consumer attitudes and spending is often a major influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. Consumer spending accounts for a major portion of the Swiss economy, so investors want to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. An increasing important element of the survey is the question concerning current buying intentions.
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