The merchandise trade surplus narrowed in February from January's downwardly revised CHF4.84 billion to CHF3.31 billion and, more importantly, from the CH5.88 billion posted in the same month in 2022. The annual deterioration reflected a 5.4 percent yearly fall in exports compounded by a 7.1 percent rise in imports.

Seasonally adjusted, the surplus stood at CHF2.48 billion after CHF2.97 billion in January. The decline here was due to a 1.1 percent monthly decrease in exports and a 1.3 percent advance in imports. Sales of chemical and pharmaceutical products (minus 3.3 percent) were notably weak while regionally, exports to the U.S. (minus 14.1 percent) fell sharply while Europe (0.3 percent) and, in particular, Asia (11.1 percent) posted fresh growth.

The real trade position also worsened as export volumes dropped 2.7 percent and imports slipped only 0.5 percent. However, on current trends, net merchandise trade remains on course to make a positive contribution to first quarter real GDP growth.

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 seasonally adjusted measures for cash and volume.

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.