CH: Merchandise Trade Balance

August 23, 2016 01:00 CDT

Actual Previous
Trade Balance level CHf2.93B CHf3.55B

The merchandise trade surplus was CHF2.93 billion in July, down from the CHF3.55 billion excess recorded in June. Accounting for the monthly surplus decline was a 1.5 percent decline in Swiss exports versus a year ago, to CHF17.7 billion, while imports increased by 2.0 percent to CHF14.8 billion. In volume terms, exports were down 6.6 percent on the year and imports down 1.2 percent.

However, adjustments for two fewer workdays in July this year compared to July 2015 result in a 7.9 percent increase in exports (2.4 percent in volume terms) and 11.8 percent jump (8.2 percent) in imports on the year. Chemical and pharmaceutical products continued to dominate both sides of the balance sheet, with exports in this category at CHF7.72 billion up 10.7 percent (but-0.1 percent in volume)on the year and imports at CHF 3.82 billion up an even sharper 32.6 percent (25.4 percent real). Watch exports continue to be in severe decline however.

Seasonally adjusted, both exports and imports increased dramatically in July from the June levels, with exports up 3.5 percent and imports up 9.1 percent. In volume terms, exports were up 5.5 percent and imports up 9.2 percent.

Both sides of the balance continue to show solid growth since hitting bottom in the third quarter of 2015. However, increases in exports, especially to the U.S. market, have largely been achieved through price cuts that cannot be profitable in the long run.

The merchandise trade balance measures the difference between the total value of Swiss merchandise exports and imports. 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 changes are also available for total exports and imports.

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.