Corporate Press Release

Press Release

SME Export Indicator for Q3 2011: Strong Franc Slowing the Growth in Exports

The strong franc is increasingly causing trouble for Swiss SMEs. Although they remain optimistic and expect another rise in exports for the third quarter of 2011, growth is likely to slow – especially as economic prospects abroad have become more subdued. The vast majority of SMEs also face pressure on margins. Those are the most important findings of the SME export outlook indicator produced by Credit Suisse and Osec.

The Swiss franc once again strengthened against currencies in the key export regions during the second quarter of 2011. This is having an effect on Swiss SMEs: Two-thirds (67%) of the companies surveyed in the SME export prospects survey expect the growth in their exports to slow as a result of the strong Swiss franc. In the previous quarter, the figure was slightly more than half (Q2/2011: 55%; Q1/2011: 58%). The precision instruments (78%), metals (75%) and chemicals/pharmaceuticals (72%) industries are particularly badly affected by this exchange-rate development. The services and electrical engineering sectors show greater resistance (both 57%).

As many as 78% of the SMEs stated that the strong Swiss franc was adversely affecting their profit margins. The precision instruments (89%), chemicals/pharmaceuticals (87%), metals (85%) and electrical engineering (83%) industries are suffering most. The 22% of SMEs not fearing pressure on margins attribute this to their ability to pass on price increases and hedge themselves against price changes.

Stage Remains Set for Expansion
The Credit Suisse export barometer, which records foreign demand for Swiss products, stands at a level of 0.4. Export prospects have therefore weakened, but remain above the growth threshold of -1. The Osec SME export outlook indicator, which is based on a regular survey of more than 200 Swiss SMEs, shows a slight cooling of export sentiment: It currently stands at 65.6 points, compared with 69.7 points in the preceding quarter. This figure is calculated from the export sentiment of SMEs for the third quarter of 2011, as well as exports in the preceding quarter. On this scale from 0 to 100, values of over 50 indicate export growth.

Optimism in Precision Instruments Industry
As for export expectations by sector, Credit Suisse and Osec reach the same conclusion: Although all sectors anticipate a rise in exports over the coming quarter, the growth curve is leveling out noticeably. According to the Osec SME export outlook indicator, a number of sectors nevertheless exhibit above-average optimism in relation to the third quarter of 2011. The upbeat mood is especially striking in the precision instruments industry, which at the start of the second quarter of 2011 had been more downcast about the future. Companies in the metals, electrical engineering and machinery and – to a slightly lesser extent – consumer goods and paper sectors can also look forward to substantial growth rates. This positive sentiment is astonishing in view of the strength of the Swiss franc. The companies that are predicting growth in exports over the coming months ascribe this mainly to their own efforts, notably product innovation (cited by 49%; multiple answers possible) and increased marketing efforts (47%).

North America and Asia Gaining in Importance
The fact that export expectations are more subdued, says Credit Suisse, is due to rather modest economic prospects in the most important destination countries for Swiss exports. Weaker demand is expected in the US in particular, but also in European countries like Germany and France, as well as China. With the exception of China, however, expected demand remains above the long-term average.

According to Osec, Swiss SMEs do not expect sagging demand in the US to affect their exports. Indeed they expect the North America region to gain in importance over the coming six months (Q3 and Q4 2011): 42% of the Swiss SMEs surveyed indicated that they are exporting to this region over the next six months compared with only 35% in the preceding quarter (multiple answers possible). Notwithstanding both the strength of the Swiss franc and the euro crisis, Europe remains by far the most important destination region for Swiss exports. 88% of SMEs intend to export to Europe over the coming six months, versus 90% in the preceding quarter. 57% of SMEs will export to the Asia-Pacific region over the next six months, 33% to the Middle East/Africa region, and 25% 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 and are consolidated to form a single indicator. Since the values in question are standardized, the export barometer is calibrated in standard deviations. The zero line corresponds to the long-term average growth in Swiss exports of 4.8% since 1985. Accordingly, the growth threshold lies below the zero line at around -1.
For more detailed information: Credit Suisse (2009), Swiss Foreign Trade – Facts and Trends, Swiss Issues Sectors, available at

Methodology of Osec SME Export Outlook Indicator
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. The SME export indicator can range from 0 to 100, whereby figures between 0 and 50 show 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.