Do the data
What the housing and interest rate numbers show for the Swiss economy - and what to do about it?
Dear Insider,
Numbers do not lie…
…most of the time.
How data is interpreted and how people (including politicians) react to it is a far more complex and interesting tale.
Some numbers are making Guy Parmelin’s life more difficult these days. An ongoing outcry about the lack of (new) affordable rental apartments has the SVP federal councilor on the back foot.
His case leads us to ask the question: how do people use the data they have, especially in Switzerland?
Quick hits:
🏨Totally tight
A recent study from Raiffeisen shows - again - the desparate apartment situation in Switzerland. With a 1.3% ‘empty rate’, Swiss apartments are in great demand - leaving few options for those without a place to call home.
🟠Come together
A cultureal and economic icon is undergoing a tranformation. The supermarket branch of Migros, the so-called “big-orange” giant of Switzerland has decided to merge its 10 regional groups into one, main organization. The move to centralization should provide cost benefits, more efficiency and more savings to clients…supposedly.
📈More and more
According to a Credit Suisse analysis, interest rates are set to rise (again) in Switzerland. The effects? That is the interesting topic… While Swiss households are over-proportionally indebted, most of this debt comes from home loans. Will it make a difference long-term?
💡The Point:
👉 With living space on everyone’s mind, Swiss Federal Councilor Guy Parmelin called together a roundtable of industry groups and representatives to discuss the situation.
The government is feeling pressure to find a solution.
With immigration projected to bring Switzerland’s population well over 9 million in the next years and a continued dependence on skilled labor to service its high-tech export economy, Switzerland needs a solution - fast.
Proposals include loosening building permit laws, allowing extra levels to be added to existing buildings and more. All ideas are on the table.
👉More than almost any other company in Switzerland, Migros is tightly interwoven in the fabric of Swiss social and cultural life. But a firm so large and so dominant also has issues. Its beloved “decentralization” - with a focus on “from the region, for the region” - is as representative of ‘the Swiss way’ as anything.
But centralization has its advantages and projections show that combining the duplicated departments (marketing, HR etc) of the 10 regional groups into one will have great effect on the bottom line. (This year’s sales volume of CHF 13 billion is a good target.) It will also break the power of the so-called “local barons” who ran region structures with great power.
Whether the Migros restructuring can avoid disruptive internal politics and - most importantly - whether it translates into lower prices for consumers, remains to be seen.
👉 Debt in Switzerland is high - with a vast amount of leverage. Credit Suisse would know something about that. But sniping aside, the situation is worth considering. Will rising rates cause massive disruptions to the Swiss economy? According to CS economists, probably not. While a large number of households have mortgage debt, the amount of other debt - credit card and more - is relatively low. Most small and medium-sized businesses also have relatively low amounts of corporate debt outstanding. And most mortgages in Switzerland have at least one more year of maturity before refinancing considerations kick in.
Even with two more rate hikes (up to 2%) projected in June and September, overall interest rates still have a ways to go before they hit disruptive levels.
💡The Insider Advantage:
As a relatively small economy, Switzerland has an advantage of being “closer to the ground” than most.
A devolved government lets decisions be made at the local and regional level. This should - theoretically - make tweeks and adjustments much easier.
But the Migros case shows that economies of scale sometimes outweigh the pluses of decentralization. That experiment will go a long ways towards showing how the future of business may look in Switzerland.
One charge that has been levelled at the Federal Reserve in recent months is that its rate hikes too often rely on lagging indicators and don’t pick up on current trends.
Switzerland and the Swiss National Bank could - and should - do a better job than their US counterparts. But the challenge will be to get local institutions to share data that would allow federal officials to make better decisions.
And those decisions - from monetary policy, to housing codes, to city planning - have a real impact on people…at every level.
”From the region - for the region” applies (still) to policy decisions as well.
We would love to hear your thoughts…!
➕The Bonus:
🔍Fully clear - Sergio Ermotti wants answers. To get them, he expressed his desire for a 360’ investigation as to why Credit Suisse failed. (Link)
⛰Get out - A Swiss village is about to get desimated - the residents of Brienz have been told to evacuate their town as the mountain next to them is about to collapse. (Link)
🎯Targeted - World-renowned Swiss-Swedish concern ABB has been the victim of a cyber attack. (Link)