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Swiss Watch Industry Forecasts Growth After 2013 Slowdown

Luxury Watches are Displayed at a Store in Beijing
Luxury watches are displayed at a store in Beijing. Exports to greater China, which imports more than a quarter of Swiss watch production, dropped 8.5 percent in the first 11 months of 2013 as that country cracked down on the use of luxury goods as bribes and illegitimate gifts. Photographer: Keith Bedford/Bloomberg

Jan. 14 (Bloomberg) -- Switzerland’s watch exports will rise in 2014 after advancing at the slowest pace in four years in 2013 due to a drop in Chinese demand, said Jean-Daniel Pasche, head of the Federation of the Swiss Watch Industry.

Exports in the first 11 months of 2013 gained 1.7 percent to 20 billion Swiss francs ($22 billion), putting them on track for the smallest annual gain since 2009, according to the trade group. Full-year shipments probably inched to a record, beating 2012’s level of 21 billion francs, Pasche said last week in an interview. Exact figures are scheduled to be published Feb. 6.

“This year’s performance should be in line with 2013, that is, a positive evolution but no longer the spectacular growth of the past couple of years,” Pasche said. He said 2014 will probably continue or exceed the growth rate of 2013, which was a “couple” of percentage points.

The growth rate has slowed each year since the recovery in 2010 when exports surged 22 percent. Exports to greater China, which imports more than a quarter of Swiss watch production, dropped 8.5 percent in the first 11 months of 2013 as that country cracked down on the use of luxury goods as bribes and illegitimate gifts.

Switzerland “exported more watches to China than in 2012 but at a lower average price,” Pasche said. Mainland China imported more than 1.6 billion francs’ worth of Swiss watches in 2012, compared with about 30 million francs in the early 2000s, according to Pasche.

‘Phenomenal’ Decade

“We’ve witnessed more than 10 years of phenomenal growth in China, so it’s not surprising to see a consolidation now,” he said. The nation’s economy has achieved annual growth rates of as much as 14 percent in the past decade and slowed down to 7.7 percent last year, according to the median estimate of 55 analysts surveyed by Bloomberg News. Growth in 2014 is forecast at 7.5 percent, the survey shows.

Rising disposable incomes in China mean there’s still potential in that market and Swiss watchmakers will still be able to count on Chinese travelers buying their products in Europe, Pasche said. However, high taxes on luxury goods in emerging markets are preventing Swiss watchmakers from reaching out to their growing middle-class, he said.

“There’s certainly a greater potential for Swiss watch producers in those markets, particularly in Brazil and India, but it would require more favorable tax conditions,” he said.

High-end timepieces typically cost about a third less in Europe than in China, said Patrik Schwendimann, an analyst at Zuercher Kantonalbank in Zurich.

The upper house of Switzerland’s parliament this year will vote on a trade agreement with China that would lower that country’s import tariffs on Swiss watches by 60 percent in 10 years.

To contact the reporter on this story: Morgane Lapeyre in London at mlapeyre@bloomberg.net

To contact the editors responsible for this story: David Risser at drisser@bloomberg.net; Celeste Perri at cperri@bloomberg.net

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