Swiss watch exports grew to a record high of 22.2bn Swiss francs (£15.8bn) in 2014, a 1.9% increase on the previous year, customs data showed on Tuesday. The record for the highest price ever paid for an individual watch was also broken: a 1932 Patek Phillipe pocket watch sold for £15m in November.
Despite the record year, ominous signs loom on the horizon for watchmakers following a disappointing December and the prospect of a stronger franc badly hurting exports.
“In December [the value of watch exports] was 1.8bn francs, down 2.5% on the previous year despite one extra working day,” The Federation of the Swiss Watch Industry (FHS) reported.
Exports to Hong Kong, a key market, fell 10.3% in the month. The fall was largely put down to disruption caused by pro-democracy protests in the preceding months.
“Hong Kong failed to get back on track after the month of November, indicating low levels of new stock in the wake of the autumn demonstrations,” the FHS said.
Richemont, owner of watch brands such as Cartier and Piaget, reported that sales in the Far East were down 12% to €1.07bn in the final three months of 2014, as a result of what the company euphemistically described as a “difficult trading environment.”
Exports to the vital Chinese market meanwhile fell 27.2% in December. A crackdown on corruption, banning the giving of ostentatious luxury gifts to public officials, is seen as part of the cause but arguably the timing of Chinese New Year is more significant.
The current year of the horse began on 31st January 2014 while Chinese New Year falls on the 19th February this year, meaning that many customers will have delayed the purchase of gifts such as watches. Sales figures for January are yet to be released.
The prospect of recession in Russia, another key market, and a weak rouble is also likely to negatively impact watch exports this year.
The Swiss National Bank‘s abandonment of its three-year peg of the Franc to the Euro in January has also caused the prices of Swiss exports to jump by around 20% overnight, although the value of the franc has been steadily falling over the last two weeks. The franc is currently around 0.93 to the euro, a 12% increase in strength from last year. When you consider that 58% of Switzerland‘s total exports were to Europe in 2014, exporters will be forced to either cut prices or see volume sales fall – regardless, a stronger franc will make it highly likely the negative trend in December will continue into this year.
Overall, the value of total Swiss exports rose 3.5% in 2014 to 208.3bn francs, beating the previous record set in 2008 and also leading to a record trade surplus of 30bn francs.
Speaking about Switzerland‘s wider position in the context of global manufacturing, Euromonitor analyst Sulabh Madhwal commented, “Owing to rising product prices, demand from distributors across the world is expected to decline. Japanese and American manufacturers are positioned well to challenge the dominance of Swiss manufacturers.”
