Credit Suisse ZEW: Analysts Expect Further Deterioration Of Economic Environment

The Financial Market Test Switzerland, carried out by Credit Suisse in cooperation with the Centre for European Economic Research (ZEW), paints a nearly unchanged picture of the prospects for the Swiss economy. In fact, the Credit Suisse ZEW indicator of

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The Financial Market Test Switzerland, carried out by Credit Suisse in cooperation with the Centre for European Economic Research (ZEW), paints a nearly unchanged picture of the prospects for the Swiss economy.

In fact, the Credit Suisse ZEW indicator of economic expectations edged up marginally by just 0.6 points to the -57.1 mark. A clear majority of the financial market experts (65.3%) forecast further deterioration of the economic environment on a six-month horizon.

The indicator for the assessment of the current economic situation also continued to worsen in March, tumbling by a noticeable 11.8 points. Inflation expectations remained almost unchanged at a low level, with 61.2% of survey participants continuing to predict that consumer prices will decline in the medium term.

Within the scope of this month’s “special question,” the financial market analysts were asked to convey their opinion regarding the significance and future of bank client secrecy in Switzerland. Merely 11% of the respondents regard abolition of the bank secrecy laws as the most likely scenario.

The results of the March survey conducted in conjunction with the Financial Market Test Switzerland continue to point to a negative assessment of the overall economic outlook in Switzerland. Accordingly, the majority of analysts surveyed (65.3%) continue to expect economic momentum to deteriorate on a six-month horizon.

Merely 8.2% of the experts forecast an improvement in the economy, while 26.5% anticipate that the picture will remain unchanged. Nevertheless, the relevant Credit Suisse ZEW indicator for economic expectations edged up just marginally compared with the previous month’s reading, by 0.6 points, and is wavering at the -57.1 mark this month.

The assessment of the financial market experts regarding the current economic environment continued to worsen versus the previous month’s survey results, with more than half of respondents (57.1%) regarding the prevailing economic climate as “bad”. None of the analysts views the present state of the Swiss economy as “good,” in contrast with 42.9% of participants who think the economy is in “normal” condition. The corresponding balance decreased by a further 11.8 points and now stands at a new record low of -57.1.

The lion’s share of analysts (68.1%) expects no change on the short-term interest rate front. The relevant balance increased to minus 23.4 (up 6.8 points). Regarding the short-term interest rate differential between Switzerland and the Eurozone, the corresponding balance rose by 7.2 points to reach -40.0, with 48.9% of the survey participants looking for the interest rate spread to narrow.

In terms of the outlook for long-term rates, 45.8% of the financial market specialists regard no change in the current level as the most likely scenario. The forecasts for decreasing and increasing long-term interest rates were split at 31.3% and 22.9%, respectively, of the experts surveyed. The corresponding balance dropped by 17.8 points month-on-month and now stands at the -8.4 mark.

To prevent any further appreciation of the Swiss franc versus the euro, the SNB has pursued a rather unconventional path, deciding to engage in intervention in the foreign-exchange markets. This month’s survey was carried out prior to this recent announcement by the national bank, and at that time 41.7% of the analysts had still anticipated that the Swiss currency would gain ground against the euro on the medium-term horizon.

Most of the experts surveyed (85.4%) expect the earnings outlook to deteriorate. In addition, even 89.6% of the analysts anticipate that profit margins will shrink, with the relevant balance accordingly dipping by 3 points and hovering at the -85.4 mark at present. The respondents expressed a uniform view regarding the unemployment outlook too, with 98% predicting a pick-up in the jobless rate.

L.D.

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