Insights 
VT 
In May, Switzerland experienced a decrease in producer and import prices, with a monthly drop of 0.5%. This decline contrasts with a previous monthly increase of 0.1%.
Breaking it down further, producer prices fell by 0.2%, while import prices saw a sharper decline of 1.1% for the month. On a yearly basis, the combined producer and import prices have decreased by 0.7%, indicating a deflationary trend.
Disinflationary Backdrop
This recent drop in Swiss producer and import prices marks a reversal from the slight rise the month before, creating a more disinflationary backdrop than we had seen in earlier months. The 0.2% fall in producer prices suggests weaker input costs for domestic goods, while the much steeper 1.1% slide in import prices reflects lower costs for goods arriving from abroad—possibly due to softer international demand or currency movements affecting trade dynamics.
Year-on-year, the decline of 0.7% doesn’t just signal a short window of reduced pricing pressure, but a broader trend forming that implies manufacturing and importing costs have been on a gentle downward path for some time. That’s likely due to easing raw material prices and freight costs stabilising after the global surges we witnessed throughout 2021 and 2022. There may also be reduced pricing power among suppliers, especially with energy prices not providing the same pressure as they did in the past eighteen months.
From our standpoint, the implication is straightforward: with input prices slipping, we anticipate a readjustment in inflation-linked expectations and futures across related instruments. Any moves in the Swiss franc or forward inflation swaps will need to incorporate this latest data print.
Potential Rate Path Changes
For those of us active in the space, this signals the potential for changes in rate path expectations by the Swiss National Bank. A continued slide in trade-sensitive price data might well feed into softer forward guidance, or at the very least temper any near-term tightening assumptions that were built in, especially given the bank’s emphasis on stable inflation below 2%. If prices fall again next month, we would need to be alert to its implications for repricing in short-end rate markets.
Moser, by not reacting publicly to recent moves in input and import value levels, may be waiting to see core inflation indicators before discussing policy shifts. The SNB has communicated a preference for measured responses, but history shows that consecutive months of weak producer inputs tend to influence monetary policy discussions sooner than later.
Beyond interest rate speculation, there’s room to look at the effects on margin expectations across export-heavy Swiss firms. With lower import costs, companies may experience an increase in operational leeway, which could feed into higher earnings depending on how much gets passed along to consumers. This in turn could shift sentiment around equity-linked derivatives and possibly change how dividend futures are priced for Swiss-listed firms.
We will also be paying attention to shifts in volatility around Swiss macro releases following this. Lower input prices tend to produce quieter FX reactions, but should this trend persist for another reporting cycle, it would likely start to weigh more heavily on expectations for broader European cross-border flows, particularly into sectors that rely heavily on imports or commodity inputs.
We’ve seen this sort of pattern before—where soft producer and import prices precede broader deflation signals, especially when external demand is also under pressure. While forward-looking indicators are not flashing red, they are hardly ignoring it either. The next set of data from purchasing managers and customs trade headings will be essential for confirming the breadth of this softness.
In the meantime, those of us in rate-sensitive strategies will need to recalculate probabilities for fixed-income spreads if pricing power continues to shrink. This drop isn’t light or passing—it’s measurable. And it’s enough to require a temporary rebalancing of front-end curve positioning against the latest inflation-linked metrics, which now look less sticky than markets may have priced in.
