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SME Export Indicator Q3 2014: Continued optimism

Export sentiment among Swiss SMEs remains optimistic again heading into the third quarter of 2014: all sectors of industry are anticipating rising exports in the months ahead. Continued above-average foreign demand is likewise expected, with particularly strong export growth stimulus projected to come from the USA. Those are the findings of the SME export indicator produced by Credit Suisse and Switzerland Global Enterprise.

The Credit Suisse Export Barometer, which tracks foreign demand for Swiss products, currently stands at a level of 1.13. Although this means that export growth expectations for Q3 2014 have retreated marginally (previous quarter: 1.17), they are still well above the expansion threshold of 0 and are also above the historical average of approximately 1.

Powerful export growth stimulus from the USA
Credit Suisse economists believe that export growth is likely to be stimulated in particular by demand from the US. Swiss exports to the UK also look poised to increase sharply. Signs continue to point to expanding exports to the Eurozone as well, the most important sales market for exports from Switzerland. However, demand momentum in the Eurozone has slackened. A mild dip in demand for Swiss goods is actually even being anticipated in France. Continued export growth stimulus is expected in the months ahead from the major emerging economies in Asia.

“Export sentiment among Swiss SMEs remains optimistic again heading into the third quarter of 2014,” says Alberto Silini, the Head of Consulting at Switzerland Global Enterprise, in summarizing the results of the SME export prospects survey: “All sectors of industry are anticipating rising exports in the months ahead.” The panel survey of approximately 200 Swiss SMEs has yielded a current SME export outlook index reading of 65.3 points. The index reading was calculated by taking SME export sentiment for the third quarter of 2014 and combining that with actual exports in the second quarter. It is clearly pointing to rising exports because the 50-point mark on the scale of 0 to 100 is the threshold that denotes expansion.

Ninety-two percent of the companies surveyed by Switzerland Global Enterprise intend to export to Europe over the next six months, almost the same percentage as last quarter (multiple answers possible). Germany remains the most important European export market – it will be an export destination for goods or services for 80% of the SMEs surveyed. Over the next six months, 53% of Swiss SMEs will export to the Asia-Pacific region, 46% to North America, 28% to the Middle East/Africa region and 21% to South America.

Methodology of the Credit Suisse Export Barometer
The Credit Suisse Export Barometer takes as its basis the dependence of Swiss exports on foreign export markets. In constructing the export barometer, we have drawn together important leading industry indicators in Switzerland's 28 most
important export countries. These indicators generally have a forecast horizon of approximately one to two quarters. The values of these leading indicators are weighted on the basis of the share of exports that goes to each country. The export barometer consolidates this information to produce a single indicator. Since the values in question are standardized, the export barometer is calibrated in standard deviations. The zero line corresponds to the growth threshold. The long-term average growth of Swiss exports of approximately 5% is 1.
For more detailed information: Credit Suisse (2009), External Trade Switzerland – Facts and Trends, Swiss Issues: Industries, available at www.credit-suisse.com/research.

Methodology of the SME Export Outlook Indicator of Switzerland Global Enterprise
The SME export outlook indicator is based on the quarterly survey of a fixed panel of more than 200 Swiss SMEs representing the pharmaceuticals/chemicals industry, machinery, consumer goods, the metals industry, paper, electrical engineering, the precision instruments industry, as well as services. SMEs indicate whether they expect growth, stagnation or a decline in exports for the current quarter as well as the coming one. To emphasize the forecast nature of the SME export indicator, expected export activity in the following quarter is weighted at 60% with exports in the current quarter being weighted at 40%. The SME export indicator can range from 0 to 100, whereby figures between 0 and 50 signal an expected decline in exports and figures of 50 to 100 an expected rise in exports. Participants provide further information on export volumes, for instance the reasons for a change in their export volume, export markets, etc. This information gives an accurate picture of the export activities of Swiss SMEs.