The merchandise trade surplus widened significantly from a smaller revised CHF4.94 billion in September to CHF8.06 billion in October. This is far larger than the CH4.75 billion posted a year ago. The yearly improvement reflected a 19.6 percent rise in exports that more than reversed a 9.0 percent fall in September. Imports also showed a significant change, from September's 4.3 percent decline to 6.7 percent rise.

Seasonally adjusted the surplus set a new record of CHF5.97 billion following a larger revised CHF4.03 billion in September. Exports increased 10.2 percent on the month, thanks largely to the chemical and pharmaceutical sectors, and reached a new record level. Imports were up 1.8 percent after a 1.0 percent drop last time.

With export volumes increasing fully 11.2 percent and their import counterpart only 0.7 percent, today's update points to a tidy positive contribution from net merchandise exports to real GDP growth. However, it still leaves the Swiss RPI at minus 35 and the RPI-P at minus 25. In other words, overall economic activity continues to fall short of market expectations.

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.