Switzerland: Exports should benefit from higher global demand and weaker CHF - ING

Julien Manceaux, Senior Economist at ING, expects that Swiss exports to have contracted by more than 1% in 2017, which should weigh on GDP growth, despite the recovery in manufactured goods exports.

Key Quotes

“In parallel, the depreciation of the CHF against the euro should bring a positive trend back by the last quarter of 2017. This recovery should continue in 2018. Core industrial sectors have already benefited from the currency move in 17Q3, especially in the chemical and pharmaceutical industry. With the USD weaker, the Swiss trade surplus with the United States should stabilise below 15 Bn USD. Therefore, Bern should not fear to be labelled a currency manipulator by The trump administration in 2018 (which would be the case if the trade surplus were to reach 20 Bn USD).”

“Improved exports should allow Swiss companies to invest and hire

Industrial production was growing by 8.6% a year in 3Q17. The recovery in industrial activity, mainly lead by external demand, has brought capacity utilisation back to their 2012 levels. With industries running at almost 83% of capacity, stronger business investments should be observed in coming quarters after 0.9% QoQ observed in 17Q2 and 17Q3. However, this rebound could be dampened by the expected weakening of household investments. Activity in the residential building sector has indeed been abating in recent quarters and the small contraction in household investment witnessed in 17Q3 (-0.1% QoQ) could be repeated in coming quarters. Nevertheless, the rebound in total investments should reach 4% in 2018, supporting GDP growth.”