Swiss Trade Surplus Rises to Record

Switzerland's trade surplus rose to a record in June, as Asian demand for Swiss-made machines outweighed consumer spending on imported televisions and MP3 players.

The surplus widened to 2.41 billion francs ($2.37 billion) from 1.87 billion francs the previous month, the Federal Customs Office in Bern said today. Adjusted for inflation and seasonal swings, sales abroad fell 1.8 percent; imports declined 2 percent.

Slowing growth in the U.S. and Europe, coupled with the 11 percent gain of the franc against the dollar and 2 percent advance against the euro this year, are eating into sales of chemicals and machines. With consumer sentiment at a 17-month low, domestic demand may not be strong enough to counter the U.S.-led slowdown in global growth.

Real, adjusted exports for the first six months fell 1.6 percent from last year, today's release showed. Sales of machines and electronics fell by 2.2 percent, while chemical sales declined 8.8 percent.

U.S. sales of Swiss products slid 8.1 percent and those to the U.K. fell 12 percent. Shipments to China rose 35 percent in June from a year ago and sales to Russia climbed 32 percent.

Emerging markets like China and India are fueling demand for everything from power grids to luxury watches. Cie. Financiere Richemont SA, the world's largest jewelry maker, reported 13 percent sales growth in the second quarter after China displaced the U.S. as the main market for Piaget watches and Cartier necklaces. Swiss watch exports gained 13 percent in June, today's release showed.

Growth in Asia may not be able to offset falling demand in Europe, the destination of about two-thirds of Swiss exports. Consumer price inflation climbed to 7.1 percent from a year earlier in China last month, eroding consumers' spending power.

Investor confidence in Germany, the biggest buyer of Swiss products, fell to a record low this month as surging inflation sapped consumers' purchasing power. The government estimated in June that total export growth will slow to about 3 percent this year from about 10 percent in each of the previous two years.

Swiss consumption growth may cool in the coming months as the fastest inflation in 15 years erodes disposable income and the slowing global economy weighs on the labor market. Imports of household items fell 11 percent in June and purchases of imported office equipment declined by 5 percent.

Economic growth will probably slow to between 1.5 percent and 2 percent this year after reaching 3.1 percent in 2007, the central bank estimates.

Swiss Trade Surplus Rises to Record, Bloomberg
7/22/2008 6:32:43 AM