CH: Merchandise Trade Balance

January 26, 2017 01:00 CST

Actual Previous Revised
Trade Balance level CHf2.72B CHf3.64B CHf3.50B

The merchandise trade balance returned a CHF2.72 billion surplus in December, down from a slightly smaller revised CHF3.50 billion in November. This made for quarterly black ink of CHF8.9 billion and a full year surplus of CHF37.5 billion, up from CHF36.5 billion in 2015.

Seasonally adjusted, fourth quarter exports fell 1.6 percent versus the previous period, their only drop in 2016, and a decline matched by imports. However, in volume terms exports dipped just 0.1 percent compared with a 2.2 percent slide in imports. This bodes well for a positive contribution from total net exports to fourth quarter real GDP growth.

For the calendar year, nominal exports expanded 3.8 percent to a record high of CHF210.7 billion, mainly due to solid gains in chemicals and pharmaceuticals. Although volumes slipped 0.8 percent, the indications are that Swiss industry has largely adjusted to the competitive losses incurred in January 2015 when the SNB abandoned its target floor for EUR/CHF. However, inflation (0.0 percent in December) remains worryingly weak and any renewed appreciation of the local currency would only make matters worse. Accordingly, despite the cautiously promising signs from the external accounts, the central bank will continue to do whatever is necessary to prevent any further CHF appreciation.

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.