Swiss exports robust in April but firms feel squeeze

ZURICH: Exports from Switzerland in April rose from a year earlier, but the prices of those goods softened, highlighting that the sector is offsetting the record-strong Swiss franc with lower prices abroad.

Many Swiss companies have complained that their margins are under pressure and the Swiss National Bank expects growth to slow to around 2 percent this year as the strong franc weighs on exports.

The central bank is hesitant to raise its benchmark rate target in case it exacerbates upward pressure on the currency.

Exports rose by a real 11.6 percent in April from a year earlier, data released by the Customs Office on Thursday showed.

The prices of exported goods, however, fell 9.6 percent, indicating that exporters are seeing their bottom line squeezed.

The euro zone is Switzerland's biggest trading partner, and the franc has been rising against the common currency as investors, concerned about debts in Greece, Ireland and Portugal, seek safer bets. The franc surged to a new all-time high of 1.2297 on trading platform EBS on Wednesday.

"(The franc's strength) is certainly having an effect but given the circumstances the performance of the sector is surprisingly strong," Credit Suisse economist Fabian Heller said. "I think you can continue to say that the gains in exports will flatten off."

SNB Vice Chairman Thomas Jordan said on Monday he was "very worried" about the exchange rate and that monetary policy reacted chiefly to the outlook for inflation.

Inflation prints for Switzerland have been low, in part because the rising franc has been insulating the Alpine economy from higher oil and commodities prices that have hit other countries.

The SNB holds its next monetary policy review on June 16 and interest rate futures only price in a full 25 basis point increase to the 3-month Swiss franc LIBOR target only in a year's time.

"With the resurgence in EMU debt woes the franc has gathered renewed strength and looking ahead, its impact both on the economy and inflation will weigh on the SNB's mind," Nikola Stephan of Informa Global Markets said.

The central bank's benchmark rate has been at rock-bottom since March 2009.

"I think the June statement will be a bit more hawkish, one would want to prepare the markets in advance for a move. Now it's not priced in," Heller said.

Copyright Reuters, 2011