CH: Merchandise Trade Balance

Tue Oct 20 01:00:00 CDT 2015

Actual Previous Revised
Trade Balance level CHf3.05B CHf2.87B CHf2.86B

The merchandise trade balance was in a CHF3.05 billion surplus in September, up from a minimally smaller revised CHF2.86 billion in August.

The expansion pushed the third quarter black ink to CHF9.42 billion, little changed from the CHF9.37 billion posted in the previous quarter. However, weakness was apparent in both sides of the balance sheet. Hence, adjusted for differences in working days, nominal exports were 5.8 percent lower on the year while imports were off some 10.7 percent, the latter biased down by falling energy costs. In volume terms, exports dropped 4.5 percent and imports 3.6 percent. For exports, sales saw particularly sharp falls in Germany and China.

The September data reflect a combination of sluggish demand at home and cheap oil. Neither factor looks likely to change any time soon and the signs are that the economy last quarter failed to match the (surprisingly firm) 0.2 percent quarterly expansion rate achieved in April-June. The SNB left policy on hold last month but there is likely to be significant speculation about additional monetary easing come the central bank's next meeting in December.

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.