Consumer sentiment was unchanged in July. At minus 15 the headline indicator was marginally firmer than market expectations but matched its April outturn and so remained below its long-run average (minus 9) for a fifth successive quarter.
Most of the main sub-indices showed little volatility. In particular, a small improvement in the current economic situation (minus 27 after minus 30) contrasted with an even smaller deterioration in economic expectations (minus 19 after minus 17). Similarly, buying intentions (0 after minus 1) were down just a point although this still left them at weakest reading since last October.
Job security (minus 76 after minus 86) showed a rather larger move but potentially the most significant change was in the inflation assessment. Hence, households view of how inflation has been developing rose by 10 points to 17, its highest mark since April 2015. At the same time, price expectations for the next twelve months also climbed 10 points to 32, its strongest level since last October. That said, both measures were still below their long-run averages (82 and 68 respectively).
The SNB can take some heart from today's survey results. There is nothing to suggest that conditions in the consumer sector have improved enough to suggest any meaningful boost to spending over the coming quarter. However, a second successive increase in inflation expectations means that policy is probably having the desired effect, albeit not as quickly or as strongly as the central bank would like.
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.