In a pressing appeal that highlights the challenges faced by the Swiss watch industry, manufacturers have urged the Swiss National Bank (SNB) to take decisive action to mitigate the appreciating value of the Swiss franc. This call comes in light of a 2.4 percent decline in watch exports in the first half of 2024, marking a significant downturn after years of robust sales. The Federation of the Swiss Watch Industry, alongside the Employers Federation, emphasized that with current inflation rates remaining well below 2 percent, there exists an opportunity for the SNB to intervene in the foreign exchange market effectively.
The luxury watch sector is not just a symbol of Swiss craftsmanship; it is a critical component of the national economy, accounting for a substantial 55 percent of Switzerland’s GDP through exports. Brands like Rolex, Patek Philippe, and conglomerates such as Swatch Group AG and Richemont epitomize the prestige associated with Swiss timepieces. However, the recent slump in demand, particularly for high-end watches, is forcing some manufacturers to implement governmental support strategies, including temporary work reductions to stave off permanent job losses.
The negative trajectory of watch exports aligns with broader concerns expressed by other Swiss industries. In August, the technology manufacturers’ association Swissmem pointed out that the elevated value of the franc jeopardizes the modest recovery witnessed in overseas sales amid a challenging global economic landscape. With two interest rate cuts made by the SNB already failing to stabilize the currency, the franc has risen dangerously close to its all-time high against the euro, reached at the end of 2023.
The economic implications of the franc’s strength are profound, as it serves not only to maintain low inflation rates—historically about a third lower than those in the eurozone—but also poses a significant barrier for exporters. Recent industry reports indicate that the most substantial impacts are felt by subcontractors and producers of entry-level to mid-range watches, with particularly grim forecasts for late 2024 exacerbating existing uncertainties.
Direct responses from various watch firms illustrate the escalating urgency of this situation. Several small to medium-sized companies have found themselves implementing short-time work measures, prolonged summer closures, or even outright layoffs to counteract the unexpected shift in consumer demand. The trade group representing these firms has warned that the current economic landscape may prove disastrous for many players in an already fragile sector.
The upcoming SNB rate decision on September 26 is a pivotal moment. The watch industry is keenly watching for any potential policy adjustments that could alleviate some of the stress on exporters grappling with volatile circumstances. Such measures might not only shield the industry from immediate financial woes but also provide a foundation for sustained growth moving forward.
As the Swiss watch industry navigates this turbulent phase, staying abreast of global market trends and adapting to changing consumer behaviors will be crucial. The allure of luxury watches may face challenges, yet the craftsmanship and heritage embedded in Swiss timepieces continue to resonate with consumers worldwide. For the sector to rebound, strategic foresight and proactive economic measures will be key in reversing the current downward trend.
In summary, while the watchmakers’ call to the SNB reflects immediate economic threats, it also underscores the resilience intrinsic to the Swiss watch industry. A combination of governmental support, strategic industry responses, and robust marketing efforts will be necessary to preserve this key segment of the economy and ensure the heritage of Swiss watchmaking is upheld for future generations.
