Swiss Trade Surplus Expands as Franc Fuels Exports


Switzerland's trade surplus widened in June as a decline in the Swiss franc fueled exports of machines, watches and metals. Imports fell.

The surplus rose to 1.72 billion Swiss francs ($1.43 billion) from 1.04 billion francs in May, the Federal Customs Office in Bern said today. Economists expected a surplus of 1.15 billion francs, according to the median of five forecasts in a Bloomberg News survey. Exports rose 1.5 percent from May when adjusted for inflation and seasonal swings, and imports fell 5.3 percent.

A 2.8 percent drop in the franc against the euro over the past four months is adding to the strongest world economic expansion since the 1970s by boosting export orders. Cie. Financiere Richemont AG, the world's second-largest luxury-goods maker, yesterday reported higher first-quarter revenue on increasing demand in markets including Russia and China.

It's a ``significant widening'' in the trade surplus, said Holger Schmieding, chief European economist at Bank of America in London. ``The weaker franc as of late may be adding to growth in exports, but it's primarily a reflection of the strength of Switzerland's trading partners.''

The Swiss economy may expand about 2.5 percent this year after an estimated 2.7 percent in 2006, the fastest since the turn of the decade, the central bank said last month. That's above the government's growth forecast of 2.3 percent for 2007.

Investor Confidence

Swiss investor confidence in the economic outlook fell in July with 72 percent of analysts expecting the economy to maintain its momentum in coming months, the ZEW Center for European Economic Research and Credit Suisse Group said today. Thirteen percent of participants forecast stronger growth ahead.

Booming global growth is fueling Swiss exports. China's economy expanded at the fastest pace in 12 years in the second quarter, the statistics bureau in Beijing said today. In the economy of the 13 euro nations, destination for about two-thirds of Swiss exports, manufacturing growth accelerated more than initially estimated last month.

The franc's decline against the euro is making goods more competitive abroad. At 2.5 percent, Switzerland's key rate is still among the lowest in the world after Japan's 0.5 percent benchmark, encouraging investors to borrow francs to fund purchases of higher-yielding assets in so-called carry trades.

Two-thirds of analysts forecast the franc to strengthen against the euro in coming months with 28 percent expecting the exchange rate to remain unchanged, the Credit Suisse survey showed today. Ninety-four percent of participants expect the Swiss central bank to raise borrowing costs further in coming months.

Electronics, Watches

For now, Swiss companies are stepping up spending and output to meet orders, pushing unemployment to the lowest in almost five years. Manufacturers remain ``upbeat'' for the third quarter, a survey of 340 companies conducted by UBS AG showed July 10. Fifty-three percent of companies surveyed reported rising export orders in the second quarter, the Zurich-based bank said.

Sales abroad of Swiss machines and electronics rose an inflation-adjusted 12 percent in June from a year earlier, the customs office said. Exports of watches increased 9.3 percent and metals shipments rose 11 percent. Chemicals makers sold 7.8 percent more goods abroad, according to the release.

Global demand ``is supporting an acceleration in gross domestic product in the second quarter through net exports,'' said Guillaume Menuet, a senior economist at Merrill Lynch & Co. in Paris. Switzerland's economy grew 0.8 percent in the first quarter from the previous three months.

Exports, Imports

In the first half of the year, the trade surplus narrowed to 6.65 billion francs from 7.13 billion francs in the six months through December 2006, today's release showed. Exports rose an inflation-adjusted 9.9 percent to 97.4 billion francs in the first half and imports gained 8.4 percent to 90.7 billion francs.

The Swiss National Bank h...


Bloomberg
7/19/2007 6:06:56 AM