That the strong Swiss franc was hurting the country’s exporters has been well documented.
But an article in the Swiss National Bank’s quarterly bulletin, out today, offers further evidence of why the central bank felt compelled to “go nuclear” and announce a cap on the franc’s appreciation against the euro.
The SNB polls companies once a quarter on how the exchange rate impacts business. The latest set of results, gathered in July and August, indicate companies badly hit by the appreciation were considering further job cuts in the coming months.
A little short of three-fifths – up from just below half in the previous quarter – claimed to be experiencing negative effects from the franc’s strength. Just 10 per cent were positively affected.
The industries hit hardest were chemicals and pharmaceuticals, metals, manufacturers of electronic products and precision instruments, and the machinery, textiles and clothing industries. Tourism and retail firms were also bleak, with the survey reporting that the tendency for Swiss residents to go shopping abroad “was no longer confined to border areas”.
Over the summer, a “large majority” of companies had acted, largely by reining in production costs. Labour costs had been cut by lowering headcount or freezing recruitment. In some cases, working hours had risen while pay remained unchanged.
More job cuts were expected to follow.
While the adversely affected companies were on balance expecting only a slight increase in sales, the figure for all other companies remained as high as in the previous quarter. In terms of employment trends, the negatively affected companies – unlike those not experiencing any adverse impact – were actually expecting cuts in headcount.