Swiss watch exports fall 25%, the worst in 80 years

The spread of COVID-19 shows no signs of abating, with a second wave of infections worsening in Europe and the United States and warnings of a third wave in Japan. Amid this pandemic, Swiss watch exports have plummeted. Leading economic journalist Tomoyuki Isoyama examines the current situation and outlook for Japan and the world based on the latest statistical data.

Swiss watch exports fall 25% to 'worst in 80 years'

　The sudden contraction of the luxury watch market is clearly evident in statistics from the Federation of the Swiss Watch Industry (FH), which I often use in this column. The FH announced that global exports of Swiss watches from January to October 2020 totaled 13,327.1 million Swiss francs (approximately 1.522 trillion yen), a significant 25.8% decrease compared to the same period in 2019. The spread of COVID-19, which led to the "elimination" of international travel and the resulting halt in economic activity, has had a direct impact on demand for watches. The FH report noted that this is "the worst decline in 80 years," and the watch market is facing an unprecedented situation.

Exports to major destinations fell sharply

　In the 10-month period, of the 30 major export destinations for Swiss watches, only three - mainland China, Oman and Ireland - saw positive growth, while the remaining 27 countries and regions all saw double-digit declines.

　Among the major export destinations, the largest declines were in Hong Kong (down 40.8%), France (down 39.0%), and South Korea (down 39.3%), but the others all saw large declines of over 20%. Exports to the United States fell 20.9% and the United Kingdom fell 29.1%. On the other hand, exports to mainland China grew significantly, up 11.3%.

　Through October, Hong Kong, which had held the top spot until last year, dropped to third place. China, which was third last year, has overtaken the United States, which was second, to become the top export destination for Swiss watches. Japan saw a 31.0% decrease compared to the same period last year, but maintained its fourth place position, the same as last year.

　Although there are still November and December remaining in 2020 (at the time of writing), the number of COVID-19 cases is on the rise again in Europe and the United States, and some places are re-entering lockdowns, making it unlikely that demand will recover. The Christmas sales season at the end of the year is also likely to be hit hard.

　Annual exports had been increasing for three consecutive years until 2019, and were expected to surpass the recent peak of 22.5577 billion Swiss francs (2.577 trillion yen) in 2020. However, due to the impact of the coronavirus, a decline for the first time in four years is now certain, and it is expected to be limited to around 17 billion Swiss francs.

　Looking at export figures for October alone, 12 of the top 30 countries and regions saw a turnaround. Overall export figures also saw a 7.1% decline, a smaller rate of decline, which some see as a sign of a bottoming out. However, with the resurgence of infections, the rate of decline is once again accelerating, particularly in Europe.

The watch market is moving in tandem with the spread of the new coronavirus

　Exports to Taiwan fell 14.0% cumulatively through October, a smaller decline than other countries and regions, suggesting that the effects of successful containment of COVID-10 are also being felt in watch sales. By October, the decline had bottomed out at 1.4%. Overall, it can be said that trends in the watch market are linked to the spread of COVID-10.

　However, even though the spread of infection in Japan has been relatively stable compared to other countries, the decline is as large as in Europe and the United States. The decline in consumption in October alone was 17.4%, exceeding the 8.1% drop in the UK and the 5.3% drop in the US. It can be said that the decline in consumption is more serious than in other countries.

　The decline in consumption caused by the consumption tax hike that began in October last year remains strong. Since the COVID-10 outbreak, a flat-rate subsidy of 10 yen per person has increased small-scale consumption until the summer, but as cash on hand has decreased again towards the end of the year, consumption has become even tighter.

　In addition, the gradually increasing anxiety about living standards is casting a shadow over watch consumption. All Nippon Airways (ANA) announced that it would be eliminating winter bonuses and offering voluntary retirement. Rumors of a 30% reduction in annual salaries spread rapidly. This "ANA shock" has also caused consumers to tighten their purse strings. Signs of a significant deterioration in corporate earnings due to the impact of COVID-19 are becoming increasingly apparent, leading to rising concerns about employment issues such as restructuring.

　Still, looking at the statistics from the Labor Force Survey, we can see that "regular employment" has continued to increase even since April, when the COVID-4 pandemic began. Meanwhile, "non-regular employment" has continued to decline significantly. This shows that the restructuring of regular employees is still to come.

　Looking at trends in the watch market, I sense a sense of danger that Japanese consumption may fall even more sharply than global consumption.

Tomoyuki Isoyama
Economic journalist. Born in Tokyo in 1962. Graduated from the School of Political Science and Economics at Waseda University. Served at the Nikkei Inc. as a securities reporter, deputy chief of the same department, Zurich bureau chief, Frankfurt bureau chief, and deputy editor-in-chief and editorial committee member for Nikkei Business, before going independent at the end of March 2011. His books include Between Reason and Emotion: Thinking About Corporate Governance from the Perspective of Otsuka Furniture and The Secrets of Switzerland, the Brand Kingdom (both published by Nikkei BP). He is currently covering a wide range of topics in politics, business, and government, with a focus on economic policy.
http://www.hatena.ne.jp/isoyant/