CH: Merchandise Trade Balance

Thu Jun 18 01:00:00 CDT 2015

Actual Previous Revised
Trade Balance level CHf3.43B CHf2.86B CHf2.66B

The merchandise trade balance was in a CHF3.43 billion surplus in May, up from CHF2.66 billion in March.

The increase in the black ink reflected weakness in imports which fell a workday adjusted 7.4 percent on the year in nominal terms and 2.4 percent at constant prices. Cash exports were 0.8 percent lower than in April 2014 but volumes were up fully 8.9 percent.

Monthly changes followed a similar pattern with nominal imports down 2.3 percent and volumes off 3.0 percent while cash exports dipped 0.7 percent and volumes climbed 5.4 percent.

The April figures point to a significant improvement in the real trade balance which bodes well for second quarter GDP growth. Having already seen retail sales volumes rebound surprisingly strongly in the same month (2.1 percent), the signs are the Swiss economy may be adjusting somewhat faster than expected to the sharp appreciation of the local currency since mid-January. That said, today's SNB Monetary Policy Assessment should still toe a very cautious line and emphasise ongoing deflationary pressures.

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.