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

The Credit Suisse ZEW indicator for expectations thus increased in April, by a significant margin of 29.4 points to the –27.7 mark. At the same time, however, the indicator for the assessment of the current economic picture declined by 8.9 points to the –66.0 level. Although inflation expectations edged up somewhat in April, more than half (52.2%) of the financial market experts surveyed still forecast retreating inflation rates in the coming six months.
Expectations for interest rates remained nearly unchanged, with the overriding majority (80.9%) of analysts predicting that rates will hold steady at current levels.

The results of the April survey conducted in conjunction with the Financial Market Test Switzerland reveal that economic expectations are brightening up in Switzerland. Although roughly half (46.8%) of all the financial market experts surveyed still forecast deterioration of the economic outlook on a six-month horizon, this group shrank in number by 18.5 percentage points compared with the previous month’s results. On the other hand, 19.1% of the analysts now predict that the economy will improve. Hence, the Credit Suisse ZEW indicator for economic expectations increased by a total of 29.4 points to the minus 27.7 mark. The majority of respondents continue to assess the current economic situation in Switzerland in a “bad” light, however. Merely around one-third (34%) of participants view the prevailing economic picture as “normal,” while none of the specialists would describe today’s economic climate as “good.” The corresponding balance therefore decreased once again by 8.9 points and now stands at the minus 66.0 level.

Regarding inflation rates, most of the experts (52.2%) still expect prices in Switzerland to continue to retreat, in contrast to 39.1% of the analysts who anticipate no changes on the inflation front in the medium term. The relevant indicator rose by 13.6 points to the minus 43.5 mark. This month’s survey results show that the lion’s share (80.9%) of respondents (up 12.9 percentage points month-on-month) foresee no change in short-term interest rates in a six-month timeframe. Only 10.6% of participants still see a decline in current interest rate levels, while 8.5% are looking for an increase here. The corresponding balance thus climbed by 21.3 points to reach minus 2.1. Most (55.3%) of the financial specialists surveyed also believe that long-term interest rates will remain stable in the coming six months, compared with 36.2% who think long-term rates in Switzerland will advance.

Forecasts for share prices edged up slightly compared with the March survey, with the majority (62.2%) of analysts predicting that the Swiss Market Index out of five financial market experts who presume that stock prices will lose ground. The relevant balance for stock market expectations thus improved a little by 6 points to the 42.2 level. A greater proportion (48.9%) of respondents assume that the Swiss franc/euro exchange rate will hold steady in the medium term, while just 21.3% of participants reckon that the Swiss currency will continue to advance against the euro.

The International Energy Agency (IEA) at the beginning of April once again revised downward its forecasts regarding global demand for crude oil and crude-oil products, and production volumes reported by OPEC countries have hit their lowest point in five years. Consequently, 56.7% of the Swiss financial specialists now expect oil prices to climb, in contrast to 41.3% who anticipate that price levels will remain unchanged in the intermediate term. Merely a marginal 2.2% share of respondents see oil prices heading downward. The corresponding balance is now hovering at the 54.3 mark (up 16.8 points).

The majority 78.3% (down 7.1 percentage points) of analysts foresee deterioration of the corporate earnings situation ahead. Likewise, 75.6% of the experts still view the picture for profit margins in a pessimistic light through a six-month window, while just 8.9% of respondents see a chance for improvement in companies’ bottom line. Turning to the Swiss labor market, expectations had actually pointed to a seasonally induced dip in the unemployment rate in the spring months. But for the first time in 15 years, any easing of the situation on the job market failed to materialize from February through to March 2009. With a view to the future trend on the Swiss labor market, nearly all (95.7%) of the analysts surveyed believe that the jobless rate will continue its ascent. The relevant balance is holding its ground at the 93.6 threshold.

Within the scope of this month’s “special question,” the participants in the Financial Market Test Switzerland were asked to convey their assessments of the trend on the real estate markets. A large proportion of respondents anticipate that the disposition in lending activity toward private investors will remain constant. On the other hand, half of the experts expect sentiment toward lending activity for institutional investors to diminish. In addition, the survey participants foresee deterioration of the potential for real estate returns, particularly in the office property sector (see link below).

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.

More detailed results – including survey participants' assessment of developments in other countries – can be found in this month's edition of the "Financial Market Report Switzerland" (please note that the URL is case sensitive) : credit-suisse.com/news/doc/media_releases/zew_report_04_09_en.pdf

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Disclaimer
This document was produced by and the opinions expressed are those of Credit Suisse as of the date of writing and are subject to change. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not necessarily a guide to the future. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.