Swiss exports defy franc surge on U.S., Asia strength

Swiss exports pushed higher in March despite the franc currency's sharp rise against the euro, as surging shipments to the United States, Middle East and Asia more than compensated for a drop-off in sales to the single currency bloc.

Overall exports rose by 4.2 percent year-on-year in real terms and by 3.2 percent on a nominal basis, the Federal Customs Office said on Thursday.

Sales to the euro zone were down 3.7 percent on a nominal basis, while exports to the United States and Middle East surged by 23.6 percent and 29.2 percent, respectively. Exports to China were up 12.4 percent.

"The effect of the Swiss franc shock is less severe than expected, but some sectors are hit far harder than others," said Matthias Pfammatter, an economist at the Customs Office.

The Swiss National Bank (SNB) shocked financial markets in January by scrapping its 1.20 per euro cap on the Swiss franc, triggering an outcry from Swiss industry and prompting economists to slash forecasts for the export-reliant economy.

The exchange rate is now close to parity, with one euro buying roughly 1.03 francs. But the economy appears to be defying the rise in the currency, which makes Swiss exports to the euro zone more expensive, in part due to the cushioning effect of U.S. dollar strength.

The trade data showed exports of jewelry up 21.7 percent on a nominal basis in the first quarter of 2015. Exports of watches and precision instruments were up 3.1 percent and 2.6 percent, respectively.

Last week, the Swiss government said it did not expect the strong franc to trigger a serious economic crisis and rejected calls for a stimulus package as "inappropriate".

The SNB is now calling for growth of 0.9 percent this year, down from 2.1 percent before it dropped the cap.

Nick Hayek, chief executive of Swiss watch group Swatch , was one of the most vocal critics of the SNB's decision, calling it a "tsunami" for the economy. But last month he described his company's outlook as "excellent", pointing to strength in the dollar..

Still, some economists say the jury is still out on the economy. Andreas Ruhlmann of IG Bank noted that the franc has been steadily strengthening against the euro since March.

"The main figure to watch is inflation which his negative at the moment. A prolonged deflationary period would bring Switzerland into recession," he said.
Smaller Swiss firms have lowered prices, sought discounts from suppliers and cut jobs to protect their profits.

But Swatch and big drugmakers like Roche and Novartis - which both posted stronger-than-expected first quarter figures this week - are relatively diversified and have weathered the franc rise.