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Economic survey by Credit Suisse in cooperation with the Centre for European Economic Research (ZEW)
Credit Suisse ZEW indicator back in positive territory
Zurich, June 17, 2009 According to The Financial Market Test Switzerland, carried out by Credit Suisse in cooperation with the Centre for European Economic Research (ZEW), economic expectations continued to brighten up further in June. The relevant Credit Suisse ZEW indicator climbed back into positive territory for the first time since September 2006, reaching the 9.7 mark. The indicator for the assessment of the current economic picture remained practically unchanged in June at the -67.7 level (up 0.9 points). Inflation expectations increased noticeably again this month, with the corresponding indicator rising by 30.5 points to the 22.6 threshold. In this month's "special" question, among other things, the financial market experts were asked to convey their opinions regarding the specific timing of when the central banks would probably commence their interest rate-hiking cycles again. The largest share of respondents (57%) predict that the initial rate hikes will likely kick off already in the first half of 2010, while one-third of the analysts regard the second half of 2010 as the most probable timeframe.
The latest survey conducted in conjunction with the Financial Market Test Switzerland reveals that forecasts on the part of the experts regarding economic momentum on the medium-term horizon in Switzerland continue to brighten. Accordingly, roughly one-third of the financial market analysts surveyed regard an improvement of the economy in the coming six months as a probable scenario. The proportion of respondents who expect the economic outlook to deteriorate in the next half-year edged down slightly to nearly 23%. However, almost half of the participants (45.1%) foresee no changes in the medium term. The relevant Credit Suisse ZEW indicator thus increased by 13.6 points to the 9.7 mark and has climbed back into positive territory for the first time since September 2006. In contrast, extremely negative assessments continue to prevail regarding the evaluation of the current economic picture, with 67.7% of the experts assessing the present economic situation in Switzerland as "bad" and 32.3% as "normal." None of the analysts regards the economic environment as "good." The corresponding balance ticked upward just a little, however, by 0.9 points to the -67.7 level.
Turning to short-term interest rates, most of the respondents (87.1%) still expect rates to hold steady at the same level. The pertinent balance dipped by 5.3 points to the 6.5 mark. The balance of indicators for the differential in short-term interest rates between Switzerland and the Eurozone went up 12.6 points to reach -3.4. The majority of survey participants (70%) continue to see no change in the interest rate spread. Forecasts for long-term interest rates hardly changed either, with most of the experts (61.3%) regarding an increase as the most likely scenario. On the other hand, 29% of the respondents still expect no change and 9.7% anticipate a decrease in long-term interest rates. The corresponding balance edged up slightly month-on-month by 6.5 points to the 51.6 level.
Regarding the Swiss Market Index (SMI), positive sentiment prevailed among the analysts this month. Hence, the majority of participants (67.7%) expect the SMI to gain ground. Merely 12.9% of the experts believe the Swiss benchmark index will lose ground. The relevant balance surged by 32.3 points and is now hovering at the 54.8 mark.
The price for a barrel of crude oil (North Sea Brent) temporarily climbed to the USD 73 plateau in June. Nearly half of the specialists (48.4%) presume that oil prices will continue their ascent, while 35.5% assume prices will remain unchanged in the medium term and only 16.1% expect descending crude-oil prices. In contrast, the financial market experts still expressed mixed views regarding the price of gold: 32.3% predict that the price of the precious metal will continue to rise, compared with 35.5% who think any further uptick in gold prices is unlikely.
This month's survey results paint a slightly brighter picture for the corporate earnings situation in Switzerland. Consequently, 16.1% (up 6.1 percentage points) of the participants reckon with an improvement in the earnings trend in a six-month timeframe, while the share of experts who forecast that the earnings situation will worsen shrank in June by 10.8 percentage points to 45.2%. The financial market analysts predict that the climate on the Swiss labor market will deteriorate in the months ahead, with the lion's share of respondents (96.8%) regarding a spurt in the unemployment rate in the medium term as the most probable scenario. The relevant balance now stands at the 96.8 level.
Within the scope of this month's "special question," participants in the Financial Market Test Switzerland were asked to express their views regarding the course of the economic recovery. Half of the experts anticipate that a renewed correction is forthcoming on the heels of the current economic revival (i.e. a W-shaped recovery), while roughly one-fourth of the respondents expect to see a U-shaped recovery (see link below).
The survey process and methodology
The ZEW has conducted a similar monthly survey for Germany since 1991. The aim of the Swiss survey is to develop indicators both for Switzerland's general economic climate as well as for the Swiss services sector.
Specifically, survey participants are asked to give their medium-term expectations for important international financial markets as regards the development of the economy, the inflation rate, short- and longer-term interest rates, equity prices and exchange rates. In addition, the financial experts are also asked to assess the earnings situation of companies in the following Swiss services sectors: banks, insurance, consumer/retail, telecoms and services as a whole.
The results represent the net difference between the percentage of positive and negative responses. Figures in parentheses show the changes for each indicator compared to the previous month.
Enquiries:
- Fabian Heller, Analyst Swiss Economy Credit Suisse, Tel. +41 44 332 90 61, fabian.heller@credit-suisse.com
- Media Relations Credit Suisse, Tel. +41 844 33 88 44, media.relations@credit-suisse.com
- Gunnar Lang (ZEW), Tel. +49 621 1235 372, lang@zew.de
- Credit Suisse
- As one of the world's leading banks, Credit Suisse provides its clients with private banking, investment banking and asset management services worldwide. Credit Suisse offers advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as retail clients in Switzerland. Credit Suisse is active in over 50 countries and employs approximately 46,700 people. Credit Suisse is comprised of a number of legal entities around the world and is headquartered in Zurich. The registered shares (CSGN) of Credit Suisse's parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.
Disclaimer
This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.
