Corporate Press Release

Press Release

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

Expectations drop in May

In the wake of the improvement the previous month, economic expectations retreated again in May. The relevant Credit Suisse ZEW Indicator fell back by 20.3 points to the -11.5 mark. At the same time, however, the indicator for the assessment of the current economic picture continued to brighten up at already high levels. The corresponding balance edged up by 6.8 points to the 68.6 threshold. Expectations for inflation and interest rates declined again in May. The indicator for inflation expectations dropped by a noticeable 30.8 points. Moreover, just slightly more than half of the financial market experts surveyed still forecast a pick-up in inflation rates on a six-month horizon. The balance of expectations regarding the short-term interest rate environment also decreased considerably, by 19.4 points to the 57.1 mark. The May survey results revealed that 42.9% (+10.5 percentage points) of the respondents predict that the Swiss franc will lose ground against the euro in the coming six months. Participants also anticipate a lower valuation of the Swiss currency versus the US dollar and British pound.

In the wake of climbing into positive territory the previous month, the Credit Suisse ZEW Indicator fell back into the negative zone in May. The indicator dropped by a noticeable 20.3 points to the -11.5 mark, reflecting expectations that economic momentum in Switzerland will lose steam relative to the current levels on a six-month horizon.

However, in interpreting the downward correction exhibited by the Credit Suisse ZEW Indicator, it should be taken into consideration that the assessment of the prevailing economic picture continues to hover at a very high plateau. In fact, the relevant balance advanced even further in May, increasing by 6.8 points to the 68.6 threshold. Still none of the experts surveyed views the present state of the economy in a “bad” light, while 31.4% see the situation as “normal” and a majority of 68.6% regard the economic environment as “good.”

On the heels of the sharp surge in past months, inflation forecasts diminished considerably in the May survey. The proportion of respondents who predict that inflation rates will rise in a six-month timeframe plunged by 25.1 percentage points to 51.4%. On the other hand, 40.0% of the participants (+19.4 percentage points) anticipate that inflation will hold steady at the current low levels in the coming half-year. A minority of 8.6% (+5.7 percentage points) of the analysts believe that a decrease in inflation rates could be in the cards.

The upward trend in interest rate expectations that had emerged in the previous months failed to prevail in May. The share of financial market experts who forecast an increase in interest rates in the next six months declined by 19.4 percentage points to 60.0%, whereas 37.1% (+19.4 percentage points) presume that the short-term interest rate environment will remain unchanged over this same period.

The relevant balance of expectations for the trend in the Swiss stock market lost 16.0 points, following the gain recorded the previous month, and is now wavering at the 54.6-point mark. Nevertheless, a majority of 66.7% (-12.7 percentage points) of the specialists still hold the view that the Swiss Market Index (SMI) will gain terrain on a six-month horizon.

The financial analysts surveyed have expressed the opinion that the Swiss franc will likely lose ground against the euro, US dollar and British pound. Indeed, 42.9% (+10.5 percentage points) of the experts expect the Swiss currency to depreciate versus the euro, while even 45.7% (+16.3 percentage points) see the franc with a lower valuation compared with the greenback 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.