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Economic survey by Credit Suisse in cooperation with the Centre for European Economic Research (ZEW)
Economic expectations still deterioratingThe Credit Suisse ZEW Indicator for economic expectations continued to retreat further in September and is now hovering at the -75.7-point mark. The indicator for the assessment of the current economic situation also continued to follow its downward trend, recording the worst reading in more than year, at 18.9 points. The indicator for inflation expectations declined further and now stands at the -35.1-point level. The survey results regarding the change in the short-term interest rate environment revealed that nearly all of the respondents forecast that interest rates will hold steady. In comparison to August, only 18.9% of the participants expected a further depreciation of the Swiss Franc (previous month: 64.7%).
In the wake of recording a noticeable decline already in the previous month, the Credit Suisse ZEW Indicator continued to follow its downward trend in September too, reaching the -75.7-point mark. This is the worst reading registered since December 2008 and points to increasingly pessimistic sentiment toward economic expectations in Switzerland. None of the respondents anticipates positive economic momentum on a six-month horizon. In fact, the majority (75.7%) of survey participants still expect the economic picture to deteriorate, whereas 24.3% foresee a stable trend at the current levels.
The assessment of the prevailing economic environment has continued to track its downtrend of the past two months. The relevant balance is now hovering at the 18.9-point mark (-15.4 percentage points). Only 27.0% of the experts still view the present state of the economy in a “good” light (-10.1 percentage points compared with the previous month's reading), while 64.9% of the analysts regard the current economic situation as "normal."
The share of respondents that forecast a pick-up in inflation in the coming six months dipped to 10.8% in September (previous month: 14.3%), thus hitting its lowest point since April 2009. However, 43.3% of the participants see no change in inflation rates (previous month: 48.6%). The proportion of experts that expect a negative trend in inflation continued to climb, from 37.1% in August to the current level of 45.9%.
The balance of expectations for short-term interest rates stands at the 0.0% threshold in September (previous month: -11.4%). The same percentage (2.8%) of respondents anticipate either an increase or decrease in short-term interest rates, respectively, whereas the vast majority (94.4%) of analysts expect the interest rate environment to remain stable in the coming half-year.
The balance of expectations for the performance of the Swiss stock market recorded a decline of 11.1 points and is now hovering at the 34.3-point mark. The share of respondents that forecast a positive trend for the Swiss Market Index (SMI) held steady at the same level as the previous month at 60.0%. Hence, the outlook for Switzerland’s stock market continues to look upbeat, albeit somewhat more pessimistic than in August. Nevertheless, the assessment on the part of the experts in this category has remained very volatile already in previous months.
After half of the financial market experts surveyed in August had predicted that the Swiss franc would lose ground against the euro, the balance for the trend in the exchange rate is wavering at the -13.5-point mark in September.
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.