Swiss September Exports Rise, Fueled by Falling Franc


Switzerland's exports increased for a fifth month in September as a declining franc made Swiss metals and watches more competitive abroad.

Exports, adjusted for inflation and seasonal swings, rose 0.4 percent from August and 4 percent from September 2006, the Federal Customs Office in Bern said today. The unadjusted trade surplus increased to 1.79 billion Swiss francs ($1.52 billion) from a revised 592 million francs.

The franc's 4 percent drop against the euro this year is making exports such as Swatch watches and Roche pharmaceuticals more competitive in the region which buys almost two thirds of Swiss goods sold abroad. Bossard Holding AG, Switzerland's largest screw vendor, said higher demand in Europe pushed profit up 70 percent in the four months through August.

``Swiss trade doesn't appear to be letting up,'' said Holger Schmieding, chief European economist at Bank of America. ``With exchange rates as they are, we're not likely to see any slowdown going forward.''

Exports to European Union countries rose 10 percent in September, the U.S. bought 8 percent fewer Swiss products than it did in September 2006, the report said.

Food and drink exports gained 16 percent from September 2006, the report said. Vevey, Switzerland-based Nestle SA, the world's largest food company, said today revenue increased 10 percent in for the third quarter.

Growth in Asia and emerging markets is boosting sales for Swiss companies like Holcim Ltd., the world's second-biggest cement maker, whose expansion in China and India led to a tripling of second-quarter profit this year.

Exports to China rose more than 17 percent in September from a year earlier and India bought 12 percent more Swiss products than it in September last year.

``Growing markets in Asia are demanding more Swiss exports,'' said Bee. ``Switzerland tends to export in specialized niches like luxury goods, pharmaceuticals and machinery where products are patent-protected and competition isn't much of a problem.''

Continued growth in Swiss exports is adding to signs that the impact of U.S. mortgage defaults on Switzerland's economy may be limited. Investor confidence in the Alpine country's economic outlook for the next six months improved in October for the first time in five months, Credit Suisse said today.

Watch Demand

Swiss watch exports rose 16 percent in September compared with a year earlier, the Federation of the Swiss Watch Industry said today. While exports to the U.S. were unchanged, shipments to Hong Kong gained 29 percent.

Geneva-based Cie. Financiere Richemont AG, the world's second-largest luxury-goods maker, gained 17 percent more in revenue from April to August this year as wealthy Chinese and Russians bought more of the company's Mont Blanc watches and Cartier jewelry.

While the declining franc makes Swiss goods cheaper in Europe, it also makes European products more expensive in Switzerland. The Swiss National Bank said the weakening currency may push up import prices and stoke inflation when it raised its target interest rate Sept. 13.

`Bluntest Warning'

SNB President Jean-Pierre Roth said yesterday ``if the weakness in the franc meant any deterioration in the inflation outlook, we wouldn't hesitate to increase rates again.''

``That's the bluntest warning I've seen that a central bank in Europe will hike rates in the future,'' Schmieding said. ``It sounds like there's a really serious risk for a rate hike in December.''

The SNB, which expects inflation to average 0.6 percent this year and 1.5 percent in 2008, has adopted a ``wait-and-see'' approach for future interest rate decisions after defaults on U.S. subprime mortgages pushed up credit costs and increased risks to economic growth, Roth said Oct. 9.

Swiss consumer prices rose 0.7 percent in September from and year earlier amid higher energy prices after increasing an annual 0.4 percent in August, the Federal Statistics Office said Oct. 2.

 


Bloomberg
10/18/2007 7:21:07 AM