Global Research Private Banking Zurich Investment horizon: 1-6 months

Research Alert

01/02/2013

Economics

Switzerland The worst seems to be over for Swiss industry

by a moderate depreciation of the Swiss franc, it seems that the Swiss industry has finally passed the trough. Production increased significantly in January as the corresponding subcomponents closed 6.7 points up at 56.3. The backlog of orders subcomponent also came in above the growth threshold (57.9). Order books are currently better filled so that further production increases can be expected. Some of the demand is probably having to be met from inventories. Another positive development lies in the sharp slowdown in the reduction of delivery times and the fact that the headcount reduction has lost momentum although the corresponding subcomponents were still below the growth threshold, they nevertheless both edged up. The SNB could consider reducing excess liquidity slightly With the PMI above 50, any increase of the floor for EUR/CHF seems off the table for now. Given the relative good correlation between the PMI and the core inflation measure (dynamic factor inflation) of the Swiss National Bank (SNB), we could see inflationary pressure increasing slightly over a 612 month horizon. For 2013, we expect an annual average inflation rate of 0.4%. In that context, the SNB may start to gradually reduce excess liquidity in the system. (01/02/2013)

At 52.5, the Swiss PMI has reached a level not seen since July 2011.

The improvement of the environment for the Swiss industry suggests that the current monetary policy mix is adequate and even leaves some leeway for the SNB to consider reducing excess liquidity somewhat.

Maxime Botteron [email protected], +41 44 332 90 61

PMI and core inflation dynamic factor

1.5 1.0 0.5 0 -0.5 -1.0 Jan 01 Jan 04 Jan 07 Jan 10 PMI SNB core inflation dynamic factor
Source: Datastream, Credit Suisse / IDC

For the first time since August 2011, the Purchasing Managers Index (PMI) came in above the growth threshold of 50. In January, the PMI climbed to 52.5 from 49.2 in December. This is the fourth consecutive monthly increase. Also helped

70 65 60 55 50 45 40 35 30 Jan 13

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01/02/2013

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HOLD SELL RESTRICTED

TERMINATED

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BUY HOLD

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Guide to analysis
Equity rating allocation as of (01/02/2013)
Investment banking interests only 40.2 % 49.2 % 8% 2.6 %

Overall BUY HOLD SELL RESTRICTED 39.17 % 50.56 % 7.87 % 2.41 %

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Subscription profile Publication Research Alert Selected chapters The worst seems to be over for Swiss industry

Publisher Giles Keating Head of Research for Private Banking and Wealth Management +41 44 332 22 33 [email protected] Oliver Adler Head Economic Research +41 44 333 09 61 [email protected]

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Maxime Botteron +41 44 332 90 61 [email protected]