SECO's third quarter confidence survey found consumers only marginally more upbeat than in July. The headline sentiment gauge was up just 2 points from last time at minus 13, its sixth consecutive reading below its long-run average (minus 9) and so indicative of a still generally cautious household sector. The outcome was in line with the market consensus.
However, expectations about the economic outlook improved significantly, from minus 19 to minus 6 and moved above their historical norm (minus 10) for the first time in one and half years. Even so, anticipated unemployment (58 after 61) showed just a small decline and at minus 2 after minus 6, consumers see only a modest upturn in their financial situation.
Still, there was also some better news on prices with the assessment of both current and future trends rising from 17 to 24 and from 32 to 44 respectively. Although the two gauges were still below their and long-run averages, the gains were potentially significantly sharp and each measure secured its highest level since the October 2014 survey.
Overall the SNB should be moderately happy with today's findings. Expectations are volatile and can change very quickly but the improvement in sentiment about the economic outlook in general and inflation in particular must come as a relief to the monetary authority. That said, there is still a lot of work for monetary policy to do if the Swiss economy is to get back onto a self-sustaining recovery.
The State Secretariat for Economic Affairs (SECO) compiles a quarterly survey of consumer attitudes on present and expected economic and financial conditions. The survey covers around 1,200 Swiss households and results are synthesised into a single summary consumer climate 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.