Swiss finance chiefs expect a boom

Swiss CFOs are more optimistic about the future than at any time since the Swiss National Bank (SNB) lifted the minimum exchange rate for the Swiss franc in mid-January 2015. Economic optimism and a mood of growth are spreading through the carpeted floors - one can almost speak of prospects for a boom: 74% (previous quarter 71%) of CFOs assess the economic outlook for Switzerland as positive; almost four-fifths (79%, previous quarter 76%) are budgeting for more sales in the coming twelve months. More than two-thirds of CFOs (68%, previous quarter 66%) rate their company's financial outlook as positive. And 41% (previous quarter 38%) expect higher margins, so that Swiss companies' profits should also improve in the coming year.

Boom with uncertain omens

According to the survey of 114 CFOs conducted by Deloitte in September, investments are also on the rise. The majority of these are planned in Switzerland - a good sign for the domestic economy. In addition to the generally positive economic data, the weakening Swiss franc is probably also largely responsible for the increased optimism. However, this makes the positive mood vulnerable to a possible resurgence of the Swiss franc. Accordingly, currency risks are once again moving into the focus of Swiss CFOs. However, as the majority of Swiss companies have now adjusted to the more volatile environment and currency risks, this risk is now less pronounced than in the past.

The second most important risk is internal corporate problems, while geopolitical risks have again slipped somewhat out of focus. "Swiss companies have broad confidence in the economic framework data in Europe and in the stability of world trade. They also seem to have increasingly adjusted to the current imponderables of US politics. They have made their own companies fit and expanded their analytical and reaction capabilities. They are also making innovative products and services more independent of external risks," says Michael Grampp, Chief Economist at Deloitte Switzerland.

Swiss franc shock largely digested

"Swiss CFOs are looking forward to the upswing - all relevant indicators are pointing upwards," Grampp's further assessment. "However, the economic upturn expected for 2018 still has to be realized, and there is no slackening of efforts. In general, however, it can already be said that Swiss companies have largely digested the franc shock and that its effects are less severe than had been suspected at the time. Many companies in exporting sectors had sharply cut back on investment and employment. Now, the willingness to invest is back on a broad front. Export-oriented companies are also much more likely to expect their workforces to grow than the rest."

European companies have a positive attitude - with the exception of the UK

The survey, which was also conducted simultaneously in other European countries among more than 1,500 CFOs, shows that in most countries, CFOs have a better view of the future of their own company than in the last survey six months ago. The CFOs also have high and further increasing sales expectations, anticipate more investments and a significant increase in the number of employees - a very pleasing sign in view of the still high unemployment in the Latin countries.

However, the prospects for an economic boom are also more favorable elsewhere than they already are. Of the major economies, France presents itself as almost euphoric in terms of several key figures (corporate outlook, investments or employee numbers), but Germany (sales), Italy (margins) or Spain (investments) also report very good figures. Perceived uncertainty is decreasing across the board in the major economies - except in the UK, where most key figures have deteriorated in view of the ongoing uncertainties surrounding Brexit.

Interest rate turnaround in Switzerland not before 2020

In the survey, the majority of CFOs from the euro zone still expected interest rates to rise within a year. They are now likely to be rather disappointed by the ECB's interest rate decision at the end of October. For two-thirds of eurozone CFOs, however, monetary policy is not a key issue and they would not change their strategy even in the event of an interest rate turnaround.

"CFOs, especially from economically stronger countries, are rather critical of the ECB's monetary policy. The majority of them consider it too loose and fear the emergence of real estate bubbles or overreactions on the financial markets. They don't want to wait much longer for the interest rate turnaround and long for a return to monetary policy normality," says Dennis Brandes, Senior Economic Analyst and co-author of the survey.

The smallest number of CFOs who expect interest rates in their country to rise within twelve months is found in Switzerland. "Companies in Switzerland are now more likely to expect the negative interest rate policy to last longer again. The SNB can hardly raise interest rates ahead of the euro area, even with stable economic growth, so we do not expect an interest rate turnaround before the beginning of 2020," is Brandes' assessment.

Source and further information: Deloitte CFO Survey