ZURICH: Switzerland’s watch-industry exports fell in 2015 for the first time since the global financial crisis, dragging overall exports lower as manufacturers battled a stronger Swiss currency and weak demand in important markets in Europe and Asia.
Swiss watch shipments, a proxy for sales, fell 3.3% in 2015 to 21.52 billion francs ($21.26 billion) from the previous year, according to trade data released by the Swiss customs office. The drop was the first time exports have fallen since 2009 when the industry was shaken by the financial crisis.
The country’s total exports fell 2.6% last year, the first yearly decline since 2009. Imports fell too, leading to a widening of Switzerland’s annual trade surplus to 36.61 billion francs from 29.75 billion francs in 2014.
Swiss exporters struggled last year with the soaring value of the Swiss franc after the Swiss central bank scrapped its policy of limiting the value of the currency.
At a stroke, the Swiss National Bank’s shock decision on Jan. 15 of last year to abandon the 1.20 francs a euro ceiling that it had defended for more than three years made the country’s products and services nearly 20% more expensive to euro-using customers.
The currency later settled down to trade around 10% higher during most of the year, creating a headache for many companies that sell their goods and services abroad. The Swiss National Bank justified its decision by saying that the franc’s persistent strength made the currency ceiling too expensive to defend.
Switzerland has paid an economic price, given roughly half of gross domestic product comes from exports, 44% of which are sold into the 19-country eurozone. Swiss exports to the region fell 6.7% in 2015.
For the watch industry, responsible for 11% of Swiss exports, the blow was exacerbated by weakness in some of its most important foreign markets.
Hong Kong, the world’s largest market for expensive timepieces suffered a 23% dip in shipments last year as retailers held off buying new stock. Other markets like China, where an anticorruption drive has reduced gifting of expensive watches, and the United Arab Emirates also struggled.
The industry has also been hit by the low oil prices, which reduced the spending from the Middle East and Russia. Sales in Paris diminished after visitor numbers sharply declined after the terrorist attacks in November.
Executives from the watch industry expect 2016 also to be tough.
“[Last year] was a challenging year, because of the franc, problems in Hong Kong, in the Middle East and Russia. All these countries are suffering,” said Marc Gaudreault, Chief Operating Officer at closely held watchmaker Parmigiani Fleurier SA at the Salon International De La Haute Horlogerie, a swish watch show in Geneva last week.
“For 2016 we expect quite the same year as 2015 for us,” Mr. Gaudreault said. “If we are flat, it is OK.”
Other watch brands are also cautious about the prospects for 2016. Piaget, a luxury watch and jewelry brand owned by the world’s second largest luxury group Cie. Financière Richemont SA, described 2015 as a year of “consolidation,” a term often used by companies to describe a weak performance.
“The years of easy growth are behind us,” said Chief Executive Philippe Leopold-Metzger at the Geneva watch show. “It isn’t the first time and not the last time.”
For the broader Swiss economy, the weak export performance might have limited the increase in Swiss GDP to around 1% last year, according to analysts.
The trade figures also reflected broader global economic uncertainty in 2015, with exports to Asia flat on the year, while they rose to the U.S. where growth has proved relatively buoyant.
