The merchandise trade surplus declined significantly from a smaller revised CHF8.03 billion in October to CHF5.42 billion in November. However, this is still larger than the CH3.72 billion posted a year ago. The yearly improvement reflected a 2.3 percent fall in exports that was easily eclipsed by an 11.0 percent slump in imports.

Seasonally adjusted the surplus stood at CHF3.96 billion, down from October's CHF5.99 billion. Exports decreased 11.0 percent on the month, mainly due to weakness in the chemical and pharmaceutical sectors. Imports were down 3.6 percent after a 1.6 percent rise last time.

With export volumes decreasing 10.8 percent and their import counterpart falling only 2.8 percent, today's update points to a marked deterioration in the real trade balance and a potential hit to fourth quarter GDP growth. Today's update leaves the Swiss RPI at minus 13 and the RPI-P at minus 8. In other words, overall economic activity continues to fall slightly 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.