ZEW-CS Financial Market Test Switzerland - Gloomy economic situation yet slightly brighter expectations

The Financial Market Test Switzerland, carried out by the Centre for European Economic Research (ZEW) in cooperation with Credit Suisse, revealed in January that the economic outlook improved somewhat on a six-month horizon. Consequently, the ZEW-CS indicator of economic expectations edged up by 9.5 points to the -66.7 mark in January.

However, the slight uptick comes against the backdrop of a considerably worse assessment of the current economic situation, with the corresponding balance tumbling noticeably by 33.4 points to the -40.7 threshold – the lowest level to date. In view of precipitously declining short-term interest rates, far fewer of the financial market experts surveyed anticipate further interest rate cuts by the Swiss central bank SNB. The corresponding balance of interest rate expectations increased by 24.7 points to the -49.1 mark. Furthermore, 72.2 per cent of the respondents foresee retreating inflation rates in the next six months.

Within the scope of this month’s "special question", participants in the Financial Market Test Switzerland were asked to convey their forecasts for economic growth and inflation in Switzerland for 2009, as well as possible scenarios regarding monetary policy. 49 per cent of the experts predict GDP growth in the neighborhood of between 0 per cent and -0.5 per cent. In addition, 47 per cent of the analysts regard measures aimed at weakening the Swiss franc as a probable or very probable option, while 34 per cent believe that the SNB could exert influence through purchasing government bonds.

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.

Detailed results

More detailed results - including survey participants' assessment of developments in other countries - can be found in this month's edition of the "Switzerland Financial Market Report".

For further information please contact

Christian David Dick (ZEW), Phone: +49/621/1235-305, E-mail: dick@zew.de

Fabian Heller (Credit Suisse), Phone: +41/44/3329061, E-mail: fabian.heller@credit-suisse.com