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

Credit Suisse ZEW Indicator: Improvement from low level

Economic expectations in Switzerland have brightened up again in October in the wake of the noticeable declines recorded in recent months, according to the Credit Suisse ZEW Indicator. The relevant balance of indicators improved by 21.3 points to the -54.4-point mark. On the other hand, the balance for the assessment of the current economic situation registered a further decrease, retreating by 7.5 points to the 11.4-point level. The balance for inflation expectations reached 3.1 points in October (+38.2 points versus the previous month’s reading), while forecasts for short-term interest rates continued to hover at the neutral threshold of zero points for the second consecutive month. October’s survey results reveal that a 34.3% share (+15.4 percentage points) of respondents predict that the Swiss franc will continue to lose ground against the euro in the course of the coming six months.

After the setbacks recorded in recent months, the Credit Suisse ZEW Indicator of economic expectations brightened up again somewhat in October. However, the indicator still remains deep in negative territory at the -54.4 mark, even following the relatively strong increase (+21.3 points). Of the financial market experts surveyed this month, merely 8.5% forecast an improvement in economic prospects, while a majority of 62.9% (-12.8 percentage points) continue to foresee a deterioration of the Swiss economy on the horizon.

The assessment of the present state of the economy has continued to follow the downward trend exhibited in past months. The relevant balance now stands at the 11.4 level (-7.5 points), with only 20.0% of survey participants viewing today’s economic picture in a “good” light (-7.0 percentage points on a month-on-month basis). The overriding majority of respondents (71.4%) regard the current economy as "normal" while the remaining 8.6% see the situation in a “bad” light.

The share of respondents looking for a pick-up in inflation on a six-month horizon resurged noticeably in October, on the heels of the declines recorded in the previous months. Roughly one-fourth of the experts (24.3%) believe that inflation rates will climb (previous month: 10.8%). A somewhat smaller proportion of 21.2% (-24.7 percentage points) expect an even further drop in inflation from the current extraordinarily low levels. However, a majority of 54.5% (+11.2 percentage points) of the analysts foresee a stable trend on the inflation front in the months ahead.

The lion’s share (88.2%) of survey participants (down 6.2 percentage points) still predict that short-term interest rates will continue to hover at low levels in the next six months. Merely 6% of the financial market experts assume that interest rates will either increase or decrease, respectively. Consequently, the relevant balance remains unchanged versus the previous month’s reading at precisely the zero-point threshold.

The balance of expectations regarding the trend of the Swiss stock market stays stable at the 35.3-point mark (+1.0 point). The proportion of analysts that forecast a positive trend for the Swiss Market Index (SMI) remained high at 55.9%. Hence, the stock market forecasts for Switzerland continue to look upbeat.

The share of respondents that expect the Swiss currency to lose terrain against the euro continued to increase in October from 18.9% to 34.3%. In addition, 45.7% (-11.1 percentage points) of the experts still anticipate that the Swiss currency will weaken versus the US dollar too.

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.