CH: Merchandise Trade Balance

Tue Sep 22 01:00:00 CDT 2015

Actual Previous Revised
Trade Balance level CHf2.87B CHf3.7B CHf3.58B

The merchandise trade balance was in a CHF2.87 billion surplus in August after a slightly downwardly revised CHF3.58 billion excess in July. August is a seasonally weak month for the balance but despite its monthly decline, the black ink was still CHF1.56 billion above its level in August 2014.

Adjusted for differences in working days, exports were down 8.3 percent on the year, only in part reflecting lower prices as volumes were also off some 6.0 percent. Imports were softer still, falling an annual 19.6 percent in nominal terms and 11.0 percent when price-adjusted.

However, even seasonally adjusted the picture was little better. Hence, nominal exports were 1.4 percent lower versus July while volumes were down fully 2.4 percent, their third consecutive decrease. On the same basis, imports declined a monthly 4.8 percent and, in real terms, 4.0 percent.

The August data point to sluggish domestic economic activity and a Swiss export industry hit by a combination of slowing demand in key markets and a still uncompetitive CHF. Third quarter GDP does not look to be shaping up very well and there remains a not insignificant risk of the SNB pushing local interest rates yet further into negative territory.

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.