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

According to the Financial Market Test Switzerland carried out by Credit Suisse and the Centre for European Economic Research (ZEW), economic expectations brightened up again somewhat in August. The relevant Credit Suisse ZEW Indicator recorded a gain of 6.9 points, reaching the 9.1 mark.

The indicator for the assessment of the current economic situation continued to follow its upward trend this month as well, surpassing the previous month’s level by 5.1 points with a reading of 27.3. Expectations regarding the interest rate environment also rose further in August, and meanwhile 39.5% of the survey participants (+15.1 percentage points) anticipate an increase in short-term rates on a six-month horizon.

At the same time, however, inflation expectations diminished slightly, with the corresponding balance hovering just barely in positive territory at the 2.3 threshold (-4.4 points). Nevertheless, only roughly 16% of the respondents expect inflation to continue retreating, while the overriding majority (65.9%) of analysts predict that inflation rates will stagnate at the current levels.

The Credit Suisse ZEW Indicator of economic expectations brightened up somewhat again in August in the wake of the weakness in the two previous months, gaining 6.9 points to the 9.1 mark. Hence, one-fourth of respondents (+7.2 percentage points) now predict that economic prospects will improve on a six-month horizon. At the same time, the share of experts who forecast a weaker economic trend ahead remained nearly unchanged at 15.9% (+0.3 percentage points), while 59.1% expect an unchanged economic outlook.

The assessment of the prevailing economic climate paints a slightly more optimistic picture again versus July, with the relevant balance picking up 5.1 points to the 27.3 level. Although the vast majority (72.7%) of analysts view the current state of the economy as “normal,” none of the experts sees the situation in a “bad” light.

Inflation expectations remained very low in August, with the share of participants who anticipate that prices will decline in the coming six months increasing by 7 percentage points to 15.9%. In contrast, 18.2% (+2.6 percentage points) of the respondents believe that inflation will rise within the same timeframe, while the majority of specialists think that inflation rates will likely hold steady at the current low levels.

Expectations regarding short-term interest rates improved in August anew, with the corresponding balance rising from 22.2 to 34.8 points. The share of experts who forecast interest rate increases in the nearer term grew by 15.1 percentage points to 39.5%, versus 55.8% (-17.6 percentage points) who expect an unchanged interest rate environment.

Precisely 60.5% of the analysts forecast that the Swiss Market Index (SMI) will gain terrain in the next half-year. But this group shrank by 7.7 percentage points versus the July survey, with the relevant balance for the SMI dipping again in August. Still, just 16.3% (-1.9 percentage points) of the experts see the index losing ground and the remaining 23.3% an unchanged SMI.

The share of respondents who presume that the Swiss franc will give up territory versus the euro increased by 10.2 percentage points to 30.2% this month, while the analysts also assume that the CHF will tend to gain more terrain against the USD, JPY and GBP than in July.
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.