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Economic survey by Credit Suisse in cooperation with the Centre for European Economic Research (ZEW)

Economic expectations remain practically unchanged

Economic expectations brightened up just marginally in February, with the relevant Credit Suisse ZEW Indicator edging up by only 1.2 points to the -17.2 mark. The indicator for the assessment of the current economic picture lost ground by 11.1 points in the wake of the strong surges recorded in previous months, but continues to hover at a very high threshold of 60.0. Inflation expectations climbed further in February, with 48.6% of respondents (+6.5 percentage points) in the interim anticipating a pick-up in the Swiss consumer price index on a six-month horizon. Forecasts regarding the short-term interest rate environment increased anew. Meanwhile, 45.7% of the survey participants expect rates to advance, with the corresponding balance rising by 10.6 points this month.

The economic outlook for Switzerland in February was virtually the same as in the previous month. The relevant Credit Suisse ZEW Indicator edged up marginally by 1.2 points, reaching the -17.2 mark. Overall, 11.4% (+6.1 percentage points) of the experts surveyed forecast an improvement in economic momentum going forward, while 28.6% (+4.9 percentage points) foresee a deterioration of the economy ahead from today’s levels. Nevertheless, the overriding majority (60.0%) of analysts still believe that the economic environment will remain unchanged.

In the February survey, 60.0% (-11.1 percentage points) of the participants view the prevailing economic picture in a “good” light, while 40.0% regard the present state of the economy as “normal” and no one sees it as “bad.” The balance of assessments for the current economic situation hit the 60.0 point threshold and thus continues to waver slightly higher than the level registered at year-end 2010.

Expectations regarding the future trend in inflation edged up slightly again this month. The share of financial market experts who presume that inflation rates will trend upward in a six-month timeframe grew by 6.5 percentage points to 48.6%. The February survey revealed that 5.7% (+3.1 percentage points) of respondents assume that inflation will continue to drop from the current extraordinarily low levels. Overall, the balance for inflation expectations rose marginally, climbing to the 42.9 mark on the heels of 39.5 the previous month.

Although the majority (54.3%) of survey participants continue to believe that short-term interest rates will hold steady at the current low levels in the coming six months, this group shrank once again in February. In contrast, 45.7% (+10.6 percentage points) of the experts are looking for an increase in short-term rates. According to this month’s survey results, 65.7% (-2.7 percentage points) of the specialists think that long-term interest rates will advance in the next six months from their still very moderate present levels.

The balance of expectations for the performance of the Swiss Market Index (SMI) declined by a noticeable 20.6 points to the 53.0 level in February. Meanwhile, still only 8.8% (+3.5 percentage points) of respondents expect the stock market to stage a retreat, while 29.4% (+13.6 percentage points) anticipate stagnating share prices. However, the lion’s share (61.8%) of analysts still predict that the SMI will gain terrain in the coming half-year.

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.