* April trade surplus smallest since December 2014
* Q1 industrial orders fall 4.6 pct year on year
* Companies say strong franc still major problem
(Recasts with economists, context, industry groups)
By John Revill
ZURICH, May 23 Switzerland's trade surplus
narrowed to its lowest level since the Swiss franc's surge
rocked the country more than two years ago, as its industrial
sector continued to struggle with the strong currency and
pharmaceuticals exports slowed.
The merchandise trade surplus fell to 1.97 billion Swiss
francs ($2.03 billion) in April, customs data showed on Tuesday,
the lowest since December 2014.
In January 2015 the Swiss National Bank scrapped its
long-standing limit on the franc versus the euro,
sending the currency soaring and making Swiss exports more
"Switzerland is still recovering from the currency shock and
it hasn't completely recovered yet," said Alexander Koch, head
of macroeconomics at Bank Raiffeisen in Zurich.
Although Switzerland's export-led economy did not go into a
recession following "Frankenshock", the effects have weighed on
growth, which Koch said he expected to hold steady at 1.3
percent in 2017 before increasing to 1.5 percent in 2018.
The SNB has used negative interest rates and currency
intervention to try to rein in the franc, which it calls
Swiss industry has borne the brunt of problems linked to the
highly valued currency. Industrial production fell 1.3 percent
in the first quarter, while new orders fell 4.6 percent, Federal
Statistics Office data showed.
Nearly half of Swiss industrial companies may relocate
operations abroad within the next three years and almost a
quarter made an operating loss last year, the Swissmem
mechanical and engineering lobby said this year.
"Industry is still in a recovery trend... but not a very
dynamic one at the moment," said Swissmem spokesman Ivo
Although a Swissmem survey of members showed a 2.3 percent
increase in orders during the first quarter of 2017, this was
compared with a very weak quarter a year ago, Zimmermann said.
Strong gains in the pharmaceuticals and chemicals industry
has supported exports in recent months, although the sector's
exports rose by only 0.3 percent in April.
Overall exports fell a real 3.8 percent in April as watch
sector exports turned lower again after a rare rise in March.
Many companies are struggling to generate enough money to
invest in new machinery and products, said Oliver Mueller, a
director at Swissmechanic, which represents 1,400 manufacturers.
"A lot have increased productivity, cut costs and reduced
investment to survive in the past two years, but the future is
very uncertain," he said.
"After two years of holding off buying equipment we are
getting to the stage where companies need to start investing
($1 = 0.9715 Swiss francs)
(Additonal reporting by Joshua Franklin; Editing by Michael