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Economic survey by Credit Suisse in cooperation with the Centre for European Economic Research (ZEW)
Economic expectations brighten up a littleEconomic expectations in Switzerland brightened up somewhat anew in March. The Credit Suisse ZEW Indicator edged up by 3.7 points to the -13.5 mark. In the wake of declining in February, the indicator for the assessment of the current economic situation also improved again, climbing to an extraordinarily high plateau of 67.6 points (+7.6 points). Inflation and interest rate expectations surged strongly in the March survey. The indicator of inflation expectations jumped by 22 points this month and, in the interim, 64.9% of the analysts anticipate that inflation rates will advance on a six-month horizon. The balance of expectations regarding the short-term interest rate environment also picked up practically the same number of points at +21.9, reaching a level of 67.6 points.
Economic expectations for Switzerland improved slightly in the March survey versus the previous month’s reading. The relevant Credit Suisse ZEW Indicator climbed by 3.7 points, reaching the -13.5 mark. This picture mainly results from a decrease in the share of analysts who expect the economic outlook to deteriorate, which shrank by 4.3 percentage points to 24.3%. The percentage of experts who forecast an improvement in economic momentum compared with February stayed nearly constant at 10.8%. The overriding majority of survey participants (64.9%) continue to foresee no change in the economic picture ahead.
The results of the March survey reveal that 67.6% (+7.6 percentage points) of the respondents view the economic climate in a “good” light, while 32.4% regard the prevailing environment as “ normal” and none of the experts believes the Swiss economy is in “bad” shape. Hence, the relevant balance for the assessment of the current economic situation has now ascended to an extraordinarily high plateau of 67.6 points.
Forecasts for the future trend in inflation have continued to increase further this month. The number of experts who anticipate that inflation rates will advance in the coming six months rose sharply by 16.3 percentage points to 64.9%. In the interim, not a single analyst assumes that inflation will continue to retreat downward from the current exceptionally low levels. Overall, the balance of inflation expectations increased markedly, from 42.9 points the previous month to the 64.9 mark in March.
The pattern in interest rate expectations shifted considerably in the March survey. The proportion of financial specialists who are looking for an uptick in interest rates on a six-month horizon surged noticeably by 21.9 percentage points to 67.6%. Merely about one-third of the respondents still think that the short-term interest rate environment will remain unchanged during this same period. The corresponding balance of indicators is therefore hovering at 67.6 points.
The balance of expectations with regard to the prospects for the Swiss Market Index (SMI) dipped this month by 7.0 points to the 46.0 level. Although 59.5% of respondents still expect the SMI to gain terrain, at the same time the number of pessimists grew by 4.7 percentage points to 13.5%.
A share of 54.1% of respondents anticipate a stable EUR/CHF currency pair. Expectations for appreciation (-12.2 percentage points) as well as depreciation (-10.5 percentage points) of the Swiss currency declined significantly, so overall the relevant balance edged down slightly by 1.7 percentage points to the -18.9 mark.
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.