New record and decline

Philippe Pegorano

Overall, 2008 was a very good year for Swiss watchmaking. Showing high rates of monthly growth, the industry exported the equivalent of 17.0 billion francs. This record level represents an annual increase of 6.7% compared to the result obtained in 2007, a progression in value terms of more than one billion francs. 2008 and the four preceding years of very high growth placed the industry at a particularly high level. The positive assessment of 2008 must however be qualified by the trend in the latter months of the year. Initially the economic environment, unsettled by financial problems, exerted scant influence on watch exports, although monthly rates declined steadily from April onwards.

From September, the sudden and very marked downturn in the economic situation impacted significantly on watch industry performance. As a result, the fourth quarter registered a decline of 7.8%. November recorded the steepest fall (-15.4%), prior to a recovery in December (see box). Continuing this trend, the year 2009 will begin in the red. The lack of general visibility makes precise forecasts difficult however.

Exports of wristwatches saw their value rise by 7.2% in 2008, to 15.9 billion francs. All materials contributed to this increase. 18-carat gold made an important contribution to the overall assessment. Precious metals generally, as well as plated timepieces, recorded the highest rates of annual variation. Bimetallic watches remained at an average level, while steel products recorded the most moderate increase with +1.9%.

Growth was also visible in terms of the number of pieces, albeit more hesitantly with a figure of +0.8%, or 210,000 more units exported than in 2007. The categories of other metals (mainly aluminium) and other materials made this positive result possible. Steel timepieces however registered a decline of more than 500,000 units (-3.5%). The fourth quarter contrasted strongly with the very good results achieved up to September in volume terms, recording a decline in excess of one million pieces.

Not all price segments followed the same trend in 2008. Watches costing less than 200 francs (export price) progressed by several points and generated considerable additional volumes. Between 200 and 3,000 francs, results were below those of 2007, particularly between 500 and 3,000 francs. Demand remained very high for timepieces costing more than 3,000 francs, which recorded growth of slightly less than 20%. During the fourth quarter, only watches costing more than 3,000 francs held firm and showed an increase in their value. Other segments recorded a decline.

Most main markets of the Swiss watch industry registered growth in 2008. Two of the leading three markets lost ground however. Hong Kong confirmed its status as the leading destination for Swiss watches by recording a two-digit increase (2,697.2 million francs; +10.9%). After bouncing back in the summer, the United States fell into negative figures late on, ending the year with a moderate decline (2,368.3; -3.0%). The situation in Japan (1,153.0; -4.5%) was negative throughout 2008. Influenced by products in transit, the results for France (1,131.0; +15.1%) indicate slight over-optimism in terms of market expectations, although growth was achieved, as was the case in Italy (1,045.2; +2.5%) and Germany (913.1; +10.2%). Several European destinations such as the United Kingdom (641.1; -2.7%), Spain (452.7; -13,5%) and Russia (290.8; -9.7%) saw their overall result decline. Generally the pace in Europe slowed, resulting in an annual increase of 3.6%. Due to very steady growth, China (826.3; 43.1%) moved up two places (from ninth to seventh). Other Asian markets in the Middle and Far East recorded significant increases. Asia was the main source of growth in 2008, with +13.2%.