The merchandise trade surplus narrowed from January's marginally smaller revised CHF4.70 billion to CHF3.66 billion in February. However, this was still well above the CHF3.32 billion posted in February 2023. That said, the yearly improvement masked a 0.2 percent drop in exports and reflected instead a 2.0 percent fall in imports. The import rate has been sub-zero every month since last February.

Seasonally adjusted, the surplus stood at CHF2.33 billion, down from January's slightly smaller revised CHF2.75 billion but only a 2-month low. Exports just rose 0.1 percent on the month while imports were up 2.9 percent, mainly on the back of a 4.8 percent bounce in chemicals and pharmaceuticals.

The real trade balance also deteriorated as export volumes edged up 0.2 percent and imports expanded 3.8 percent. However, so far this quarter the surplus is more than 16 percent larger than its average level in the fourth quarter of last year. Accordingly, net merchandise goods trade remains on course to provide a small boost to first quarter 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.