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Swiss Trade Balance May 2022: surge in imports towards a level record

We do not like Purchasing Power or Real Effective Exchange Rate (REER) as measurement for currencies. For us, the trade balance decides if a currency is overvalued. Only the trade balance can express productivity gains, while the REER assumes constant productivity in comparison to trade partners.

Who has read Michael Pettis, knows that a rising trade surplus may also be caused by a higher savings rate while the trade partners decided to spend more. This is partially true. Recently Europeans started to increase their savings rate, while Americans reduced it. This has led to a rising trade and current surplus for the Europeans. But also to a massive Swiss trade surplus with the United States, that lifted Switzerland on the U.S. currency manipulation watch list.

To control the trade balance against this “savings effect”, economists may look at imports. When imports are rising at the same pace as GDP or consumption, then there is no such “savings effect”.

After the record trade surpluses, the Swiss economy may have turned around: consumption and imports are finally rising more than in 2015 and early 2016. In March the trade surplus got bigger again, still shy of the records in 2016.

Swiss National Bank wants to keep non-profitable sectors alive

Swiss exports are moving more and more toward higher value sectors: away from watches, jewelry and manufacturing towards chemicals and pharmaceuticals. With currency interventions, the SNB is trying to keep sectors alive, that would not survive without interventions.

At the same time, importers keep the currency gains of imported goods and return little to the consumer. This tendency is accentuated by the SNB, that makes the franc weaker.

Texts and Charts from the Swiss customs data release (translated from French).

In May 2022, Swiss foreign trade strengthened in both directions of traffic: seasonally adjusted exports increased by 1.2% while imports jumped by 10.3%. The latter thus confirmed their upward trend despite strong fluctuations. Due to the different pace of growth at the outflow and the inflow, the trade balance surplus stood at CHF 2.0 billion.

In short

⇑ Exports of machinery and electronics continue their momentum (+3.3%)

⇑ Imports rise to a record high

Imports of metals: the rise continues (+5.3%)

⇓ Decline in chemical-pharmaceutical exports (–155 million francs)

Swiss exports and imports, seasonally adjusted (in bn CHF), May 2022

Swiss exports and imports, seasonally adjusted (in bn CHF), May 2022

- Click to enlarge

Global development

After their timid rise in the previous month, seasonally adjusted exports continued their positive trend in May 2022 (+1.2%; real: +2.4%). Imports jumped by 10.3% (actual: +7.1%) and thus overcompensated for the decline recorded in April. These amounted to 19.8 billion francs, thus marking a new monthly peak. The trade balance closes with a surplus of 2.0 billion francs.

Switzerland Trade Balance, May 2022

(see more posts on Switzerland Trade Balance, )
Switzerland Trade Balance, May 2022

Source: - Click to enlarge

Decline in exports to Spain, Italy and France

At the exit, almost all the groups of goods ended in the green in May 2022. Exports of the machinery and electronics sector swelled by 91 million francs (+3.3%), confirming their growth of the previous month. Sales of precision instruments (+110 million or +7.7%) as well as jewelery and jewelery (+61 million or +6.2%) also increased. Chemicals and pharmaceutical products fell slightly (–1.4%; –155 million), which is to blame for drugs and active ingredients. Watch exports, for their part, stagnated at a high level.

After its decline the previous month, Asia is, among the three main markets, the only one to have posted a significant increase (+12.4%). China (+456 million francs) and Hong Kong (+102 million) have shown the way. Exports to Europe eroded by 1.0%; Spain, Italy and France experienced the strongest contractions (cumulative: –713 million). The increase, among others, of the United Kingdom (+138 million) has however made it possible to limit the breakage. Deliveries to North America fell 6.0% (USA: –5.1%); they have also been on a flat trend for more than a year.

Swiss Exports per Sector May 2022 vs. 2021

Swiss Exports per Sector May 2022 vs. 2021

- Click to enlarge

Double-digit increase for imports from Europe and Asia

Chemicals and pharmaceuticals (+1.2 billion francs or +27%) contributed significantly to the strongest relative monthly increase recorded at entry for two years. Imports of medicines, in particular, took the lift (+962 million). Jewelery and jewelery (+32.4%) as well as vehicles (+7.9%) also largely supported growth. Metals (+5.3%) confirmed their positive trend that began in May 2020. Only energy products (–12.2%; actual: –23.7%) contracted and for which the price surge subsided. is continued.

From a geographic perspective, growth at entry was mainly rooted in Europe and Asia, with these two regions each posting double-digit growth (+13.0 and +10.0% respectively). On the Old Continent, after being disillusioned the previous month, Germany, above all, was a hit (+403 million francs). Arrivals from Slovenia increased by two-fifths and those from Ireland by two-thirds. The United Kingdom was not left out (+141 million), even posting a record level since the start of the Covid-19 pandemic. On the Asian side, Singapore and South Korea stood out with growth of one-third each. Deliveries from North America, for their part, increased by 2.2%.

Swiss Imports per Sector May 2022 vs. 2021

Swiss Imports per Sector May 2022 vs. 2021

- Click to enlarge

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George Dorgan
George Dorgan (penname) predicted the end of the EUR/CHF peg at the CFA Society and at many occasions on and on this blog. Several Swiss and international financial advisors support the site. These firms aim to deliver independent advice from the often misleading mainstream of banks and asset managers. George is FinTech entrepreneur, financial author and alternative economist. He speak seven languages fluently.
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