(22 JUNE 2017)DAILY MARKET BRIEF 1:Switzerland’s trade activity picked up in May

After the usual March-April contraction, Switzerland’s trade surplus bounced back in May amid a sharp recovery in exports. The trade surplus rose to CHF 3.4 billion in May from CHF 1.96 a month earlier. Exports - in real terms - increased 2.9% m/m while imports eased to 2% m/m.

Exports to China passed the CHF 1bn threshold to print at 1.16bn while imports reached 1.02bn, leaving a trade surplus of CHF 139 million. Trade activity with the European Union also accelerated substantially with exports and imports rising 1.47bn and 2.12bn respectively, adding evidence that the European economy is on the right track.

It was quite a pleasant surprise for the Swiss watch industry as exports rose 9% last month compared to a contraction of 5.7% in the previous month. The sharp recovery was mostly driven by a surge in exports to Hong Kong, China and Italy, while Gulf countries reduced sharply their imports amid falling oil revenue and geopolitical uncertainties.

All in all, the report showed that the Swiss economy is still right on track but continues to suffer from the strong CHF. The recovery pace is solid especially given the slower than expected recovery in Europe and the United States. Swiss companies already optimised their functioning and no more gains can be expected on this side. Investments have been reduced to the minimum, costs have been cut. Economic improvement of Switzerland’s main trading partner is more necessary to see a substantial growth acceleration.

By Arnaud Masset