Swiss exports up in Oct, but EU sales suffer

ZURICH, Nov 22 (Reuters): Swiss exports to the European Union fell 2.2 per cent year-on-year in October, adding to signs that sluggish demand in Switzerland's biggest trading partner is hurting firms already suffering from the strong Swiss franc. Exports overall from Switzerland rose by 1.5 per cent in nominal values in October to 17.004 billion Swiss francs, the federal customs office said Tuesday. The watch industry posted the strongest gains, up by 18.6 per cent year-on-year, with Germans and Italians in particular splashing their cash on Swiss timepieces. But exports fell some 6.5 per cent in the metals, machinery and electrical sector while paper industry exports sank 20 per cent. "If we look across geographies, Swiss exports to European countries apart from Germany are weakening quickly and I don't see any improvement in the coming months," said Pictet economist Bernard Lambert. To try to tame the strong Swiss franc, the Swiss National Bank (SNB) has set a cap of 1.20 francs to the euro, which exporters say has helped provide some stability. But with the economic outlook in many of Switzerland's main trading partners darkening, companies have warned they may have to slash jobs and move production abroad as the strong currency eats into margins. Exports to Asia rose 5.4 per cent overall, but those to China sank 12 per cent. European Union buying came under pressure with exports to Spain, the UK, Sweden, Belgium, Greece, Finland, Portugal, Denmark and Slovakia all seeing double-digit drops. Business group Swissmem, which represents firms in the electrical, machinery and metals sector, warned last week that exports to emerging markets would not be able to take up the slack from a weaker growth in the euro zone. But economists said the data was unlikely to make the central bank bow to pressure from business groups to shift the cap, as sluggish demand from abroad was beginning to weigh more heavily than franc strength. "(With respect to the cap) there are pressures on the SNB and firms are clearly suffering, but I don't think these figures will change anything," Pictet said. Swiss prices fell in both annual and monthly terms in October, focussing attention on the risks of the economy stuttering to a halt, and all eyes will be on the Swiss National Bank's next policy review on December 15 to see whether it takes further measures to shield the economy from the strong currency. Analysts have raised the prospect of further falls in prices next year and those for exported goods fell 7.3 per cent versus the previous year in October. Overall Switzerland ran a trade surplus of 2,150 million Swiss francs in October, up from a revised 1,911 million in September.