World Economy

Swiss Economy at Standstill

Swiss Economy at StandstillSwiss Economy at Standstill

Confidence in Switzerland’s economy came off an 18-month high in October to land back at zero in November, implying that investors expect no change for now in factors weighing against growth, a closely-watched index showed.

The Swiss ZEW investor sentiment index points towards economic developments in three to six months’ time, Reuters reported.

With more eurozone stimulus measures expected to add to upward pressure on the Swiss franc’s value, the index fell 18.3 points to 0, Credit Suisse, which issues the indicator in cooperation with the German ZEW economic research institute, said on Wednesday.

Assessment of current conditions likewise worsened as one in six analysts rated the present economy as bad, while only one of 33 participants rated it positively.

In late October, European Central Bank President Mario Draghi signaled new stimulus measures next month that could include deeper cuts into its negative deposit rate, making lower Swiss interest rates more likely as the Swiss central bank tries to maintain the spread between Swiss and euro rates, analysts say.

Eurozone stimulus could further hamper efforts to keep the Swiss franc at its current 1.08 franc level against the euro, and expectations for the franc to strengthen against its most important trading partners’ currency rose.

The euro fell from just under $1.15 in mid-October to a low of $1.06 on Wednesday, but the franc has managed to hold steady largely between 1.08 and 1.09 francs per euro.

“The balance of expectations of 6.1 points ... indicates that the financial analysts surveyed are leaning toward an anticipated appreciation of the franc against the euro,” Credit Suisse said in the release. “This might be connected with expectations that the European Central Bank will increase its monetary policy accommodation in December.”

Analysts remain pessimistic that a strong franc will further hit Swiss exporters, who are already under pressure.

Nearly half of respondents saw exports falling this month and more respondents saw further declines than improvements in three to six months’ time.

In nominal terms Swiss exports have dropped each quarter of 2015 so far, with the biggest slide occurring in the third quarter, the worst for watch sales abroad since 2009.

Slipping exports have been offset in the trade balance by even greater falls in imports, flattering output data but fueling concerns that manufacturers are ordering fewer parts because they are making fewer products.

Switzerland’s trade surplus is forecast to widen slightly in October by a Reuters poll.

The assessment of current situation of Swiss economy also weakened in November, by 6.9 points to -12.2. About 80% assess the economic situation to be normal.

Close to 60% of analysts forecast a stable economic activity for the coming six months. Meanwhile, the remaining opinions are split equally between optimists and pessimists who constitute about 20% of respondents respectively.

The Federal Customs Office is set to release figures on Thursday.