The merchandise trade surplus narrowed from November's marginally larger revised CHF3.83 billion to CHF1.25 billion at year-end. This was only around half of the CHF2.41 billion posted in December 2022 and a multi-year low. The deterioration reflected a 9.7 percent yearly slump in exports that more than offset a 4.7 percent slide in imports. Annual growth of the latter has been sub-zero every month since last February.

Seasonally adjusted, the surplus stood at CHF1.37 billion, down from November's smaller revised CHF2.25 billion and the weakest reading since November 2022. The latest shrinkage was due to imports which rose a monthly 6.9 percent, their fourth advance in the last five months and mainly due to a 14.6 percent surge in chemicals and pharmaceuticals. Exports climbed a more modest 2.1 percent having fallen nearly 11 percent in October/November.

The real trade balance also worsened as export volumes increased 1.1 percent while their import counterpart rose 2.3 percent. Indeed, net volumes contracted by more than 30 percent over the quarter as a whole, implying a hit to fourth 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.