The merchandise trade surplus narrowed again in July, falling from June's marginally smaller revised CHF4.79 billion to CHF3.13 billion. However, more importantly, it was slightly short of the CHF3.39 billion posted in the same month in 2022. The modest annual decline reflected a hefty 8.5 percent yearly drop in exports and an 8.7 percent decrease in imports.

Seasonally adjusted, the surplus stood at CHF2.56 billion, down from CHF3.23 billion in June and a 3-month low. The decline here was due to a 5.7 percent monthly slide in exports that more than outpaced a 3.3 percent fall in imports. At the same time, a 3.9 percent decline in export volumes and a smaller 1.8 percent decrease in their import counterpart saw the real trade surplus narrow by 18 percent. Real net exports have now deteriorated in three of the last four months, a trend that warns of a possible negative contribution to third quarter GDP growth and fresh problems for the SNB over CHF strength.

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.