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Switzerland - Economic outlook diminishes once again

22 June 2011

The index of economic expectations, published today by the Centre for European Economic Research (ZEW) on behalf of Crédit Suisse has dropped noticeably in June 2011 for the second consecutive month, falling from -11.5 to the -24.3 mark, which is the lowest level recorded since November 2010.

59.5% of respondents still anticipate that the current favourable economic momentum will continue to prevail in the coming six months as well. However, merely 8.1% (-3.3 percentage points) of the experts foresee further improvement in the economy ahead, in contrast to 32.4% (+9.5 percentage points) of the analysts who in the interim see a cool-down in economic momentum.

Assessment of current economic situation remains robust

At the same time, noteworthy once again is that any expectations for a cool-down in the economy are tempered by the persistently very strong assessment of the current economic situation. Indeed, the relevant balance edged up by +1.7 points in June, with the vast majority (70.3%) of participants viewing the present state of the economy in a 'good' light. A share of 29.7% of the respondents regard the economic environment as 'normal' while none of the experts describes the current economic picture as 'bad'.

Inflation expectations continue to decline

As in the previous month, inflation expectations dropped considerably in the June survey. The proportion of respondents who assume that inflation rates will pick up on a six-month horizon decreased by -10.9 percentage points to 40.5%. On the other hand, 46.0% of the participants (+6 percentage points) presume that inflation will hold steady at the current low levels in the coming half-year. And 13.5% (+4.9 percentage points) still regard sinking inflation rates as a probable
scenario.

Interest rate expectations decreasing as well

Expectations for short-term interest rates also declined in June for the second month in a row. The share of financial analysts who expect interest rates to advance in the coming six months shrank by -8.6 percentage points to 51.4%. In contrast, 45.9% (+8.8 percentage points) of the experts believe that the short-term interest rate environment will remain unchanged in this timeframe.

Stock market assessment slightly more optimistic in June

In the wake of the decline recorded in May, the balance of expectations for the trend of the Swiss Market Index (SMI) has now rebounded to the 69.4 mark (+14.8 points). 75.0% of respondents expect share prices to gain terrain in the coming six months, while merely 5.6% (-6.5 percentage points) see the SMI losing ground.

Currency market forecasts paint mixed picture

The experts surveyed still anticipate that the Swiss Franc will depreciate in value versus the Euro and the US Dollar, although the tendency was somewhat less pronounced in June. The corresponding balances edged up by +6.5 and +12.0 points, but continue to hover in negative territory at the -13.5 and -10.8 levels, respectively.

To read the full financial market report, in German language, please click here

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