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UBS outlook Switzerland Q3 2011 - Economy grows despite record-high franc

Zurich/Basel Media Releases Switzerland

The strong franc has yet to impact the labor market. Most companies responding to UBS's quarterly survey plan to increase their headcount in the third quarter. The franc has also slowed exports, which continue growing and have exceeded pre-crisis levels.

Despite the record-high franc, nearly half of the industries surveyed by UBS have seen increases in new foreign orders and export revenues. The increase came, however, at the cost of lower sales prices and profit margins. Exports are now above pre-crisis levels, due largely to an exceptionally strong first quarter. The currency's strength did not hold back employment in most industries; rather, most companies surveyed intend to increase headcount. The skilled labor shortage, a long-term problem, has worsened since the last quarterly survey.

UBS Wealth Management Research expects economic growth to reach 2.7 percent for the entire year. The strong franc has thwarted the Swiss National Bank's (SNB) plans to raise interest rates. An interest rate hike remains unlikely before the European debt crisis eases and the franc softens. The SNB can currently do nothing to weaken the franc except to hold interest rates near zero. Intervention in currency markets is highly unlikely, since the SNB's equity levels are depleted.
The recent interest rate rise for the Eurozone should strengthen the euro against the franc. Any improvement in the situation in Greece should send exchange rates back to CHF 1.25-1.30 per euro. We nevertheless recommend exercising vigilance and taking early action to protect against the risk of a further strengthening of the franc.

Energy efficiency and energy security
In the July issue of our quarterly publication, UBS economists take a close look at Switzerland's energy supplies and energy security. Among other things, they examine the consequences of abandoning nuclear power and in particular the most promising areas for conserving energy.

The latest edition of UBS outlook Switzerland also features in-depth assessments of the business cycle, the currency and interest-rate situation as well as property markets.

Included with UBS outlook Switzerland is "Switzerland in figures"
This latest edition of our statistics brochure contains some 2,000 facts and figures on the Swiss economy and the individual cantons as well as key data on Switzerland's largest trading partners.


Daniel Kalt, Chief Economist Switzerland
Tel. +41 44 234 25 60

Caesar Lack, Wealth Management Research
Tel. +41 44 234 44 13

Sibille Duss, Economic Research Switzerland
Tel. +41 44 235 69 54

UBS publications and forecasts for Switzerland: Switzerland in Figures:

UBS Swiss economic forecasts

UBS Business Cycle Indicator and gross domestic product

The UBS economic indicator: a barometer of the Swiss economy since 1975
Since 1975, UBS has conducted quarterly surveys of companies operating in Switzerland concerning their business outlook. UBS economists have drawn upon this data to develop an economic indicator designed to provide reliable forecasting of the outlook for the Swiss economy. The following survey elements flow into the calculation of the economic indicator: change in total incoming orders versus the previous quarter, projected change in orders for the next quarter, change in domestic and international incoming orders, production, finished goods inventories, staffing levels and order backlog.