CH: SECO Consumer Climate

Thu May 07 00:45:00 CDT 2015

Consensus Actual Previous
Level -11 -6 -6

SECO's latest survey showed no change in consumer sentiment last month. At minus 6 the headline climate indicator matched its January reading and was 5 points above its level in October 2014.

Amongst the four components, expectations about economic prospects actually improved 4 points to minus 8 while the unemployment outlook (51 after 52) was essentially stable. Similarly, future household budget trends (up 3 points at 5) showed a small improvement but anticipated savings (down 7 points to 31) deteriorate somewhat.

Elsewhere in the survey there was a useful rise in buying intentions (up 8 points to 15) but by far the largest move was in inflation expectations (down some 35 points at minus 3) which hit their second lowest level since 1973.

The nosedive in households' inflation outlook, triggered by January's sharp appreciation of the CHF, is a big worry for the SNB. Fortunately for now it does not look as if the slump will have any major impact on consumer spending; indeed the survey's findings bode well for a pick-up in consumption near-term. However, the risk is that expectations of weaker prices cause consumers to defer current consumption at the expense of aggregate demand and the economy as a whole.

Today's findings could have been a lot worse but still leave a very clouded picture of Swiss economic growth in 2015.

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.