Credit Suisse: Expectations plunge for Switzerland (CH)

According to the latest Credit Suisse ZEW Indicator, economic expectations for Switzerland have diminished significantly. The indicator plunged by 34.6 points to the
-58.9 point mark in July, thus reaching its lowest level since the beginning of 2009.

The indicator for the assessment of the current economic situation also recorded a sharp drop, falling by 17.4 points to the 52.9-point threshold. The respective balances for inflation as well as interest rate expectations also registered much lower readings in July.

The indicator for the inflation outlook decreased by 27.0 points, with merely 23.5% of the financial market experts surveyed predicting that inflation rates will advance in the coming six months. The balance for expectations regarding the short-term interest rate environment lost ground by 30.5 points to the 18.2-point level.

At the same time, however, a greater share (55.9%, up 15.4 percentage points) of analysts in this month's survey anticipate that the Swiss franc will lose terrain versus the euro in the coming half-year.

The Credit Suisse ZEW Indicator of economic expectations recorded the most pronounced decline in July since September 2009. The indicator plummeted by 34.6 points to reach the -58.9 point mark – the lowest level in two-and-a-half years. Merely a tiny minority of 2.9% of the financial market experts surveyed anticipate that economic momentum will improve in the coming six months. In contrast, a clear majority of 61.8% of respondents (+29.4 percentage points) now foresee a deterioration of the economic situation. A share of 35.3% (-24.2 percentage points) of the analysts expect the economy to exhibit a stable trend at the present levels.

The diminishing economic expectations already seen in recent months have been tempered, up to now, by a very upbeat assessment of the current economic situation. In July, however, the prevailing evaluation has deteriorated as well. The relevant balance has declined by 17.4 points, and only around half (52.9%) of the survey participants still view the economic picture in a 'good' light.

A proportion of 47.1% (+17.4 percentage points) of the experts regard the economic environment as 'normal', while none of the respondents believes that the economy is in a 'bad' state of health at the present time.

The inflation outlook diminished more noticeably in July than in the previous months. The share of analysts who predict that inflation rates will climb on a six-month horizon amounts to just 23.5% (compared with 40.5% in June). On the other hand, 23.5% of the participants (+10.0 percentage points) forecast that inflation will retreat in the next half-year. Slightly more than half of the respondents (53.0%) assume that the inflation rate will continue to hover at the current low levels.

The indicator for the short-term interest rate expectations fell sharply by 30.5 points to the 18.2-point mark in July. The share of respondents who expect interest rates to advance in the coming six months dropped by 24.1 percentage points to 27.3%. Meanwhile, 63.6% (+17.7 percentage points) of the experts think that the short-term interest rate environment will remain unchanged within this timeframe.

Following an improvement of 14.8 points in the previous month, the balance of expectations for the trend of the Swiss stock market (SMI) has now lost ground by more than double the amount of points (down 31.1 points) to the 38.3 level.

On the heels of the strong appreciation of the Swiss franc exhibited in July, the financial market experts surveyed anticipate that the currency will rather trend on towards the weaker side again. In particular, the indicator for the Swiss franc exchange rate versus the euro dipped by 7.1 points to -20.6 points this month.

Source: Credit Suisse

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