ZEW-CS Financial Market Test Switzerland - Expectations Deteriorate

The ZEW-CS-Indicator of Economic Sentiment for Switzerland has declined by 14.2 points, retreating to the minus 5.1 mark in September. In the wake of a short-lived improvement in August, the Indicator has diminished considerably in September, dropping to the lowest level since April 2009. This is revealed by the current Financial Market Test Switzerland, carried out monthly by the Centre for European Economic Research (ZEW)in cooperation with Credit Suisse (CS).

However, the assessment regarding the current economic situation turned out to be much more optimistic in September. The relevant balance rose by 13.7 points to the 41.0 level – the highest reading since July 2008.

Inflation expectations continue to hover at a low level in September, but edged up just slightly. Most of the analysts forecast unchanged inflation rates as a likely scenario. The proportion of respondents who foresee a rise in inflation rates in the coming six months increased by 5.5 percentage points to 23.7 percent.

Expectations regarding short-term interest rates increased once again in September, with the corresponding balance climbing from 34.8 points to the 46.2 mark. The group of experts who prognosticate interest rate hikes in the next six months grew by 6.7 percentage points to 46.2 percent. In contrast, 53.8 percent are anticipating unchanged interest rates.

Expectations with respect to the Swiss stock market are optimistic. 75.7 percent of the survey participants expect the Swiss Market Index (SMI) to gain terrain in the next half-year. This proportion grew by 15.2 percentage points and the respective balance increased to the 67.6 threshold. Merely 8.1

percent (minus 8.2 percentage points) of the respondents presume that share prices will retreat.

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.

For further information please contact

Lena Jaroszek, Phone: +49 (0)621/1235-380, E-mail: jaroszek@zew.de

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