Economy: Global economy still fragile

Export-oriented sectors of the economy are facing pressure on many fronts. Besides the huge US tariffs, persistently below-par growth in Europe and China is also curbing demand for Swiss products from abroad. France’s worsening government crisis and resulting political deadlock are likely to further hamper potential growth opportunities. Against this backdrop, both order volumes and the business outlook for Swiss industrial companies have recently deteriorated sharply. Although sectors focused on the domestic market are still performing solidly, their momentum also remains subdued. One exception is construction, which has benefited from the Swiss National Bank’s (SNB) robust monetary easing over the past eighteen months.

Growth, sentiment and trend

In percent

The availability of US economic statistics is currently limited due to the current government shutdown. With Congress failing to agree on a new budget in time, the administration was forced to suspend almost all of its work. However, data collected privately and published before the shutdown delivered upside surprises in some cases. For example, it showed that US household consumption has picked up slightly in recent months. Nevertheless, the economic climate remains challenging. The labour market slowdown continued in September, and business sentiment deteriorated further. We can also expect higher inflation in the medium term once the huge inventories built up before the introduction of tariffs have been depleted and more price increases are passed on to consumers.

Growth, sentiment and trend

In percent

For the time being, the eurozone economy doesn’t look to be picking up momentum or seeing any sustained move away from its below-par growth. The recent slight signs of recovery came to nothing in September. The region’s two economic heavyweights, Germany and France, are continuing to hold back its performance. France’s fresh government crisis is creating additional uncertainty and seems likely to shift investment decisions further into the future. Meanwhile, the impact of Germany’s huge fiscal package will take time to feed into the real economy. On a brighter note, at 2.2 percent, the region’s inflation rate is, by international standards, currently exceptionally close to the targets set by the European Central Bank (ECB).

Growth, sentiment and trend

In percent

The economic figures from China, the emerging markets’ largest economy by far and the second biggest worldwide, were disappointing last month, weakening virtually across the board. Growth in consumer activity clearly lost momentum, while investment is slightly above last year’s level only due to government support. Economic momentum in India, the second-largest emerging market, is a great deal more dynamic. Its growth remains robust, helped among other things by higher-than-average rainfall during the monsoon season. This looks set to ensure a good harvest of agricultural products such as rice, corn, cotton, sugar cane, oilseeds and pulses.

Growth, sentiment and trend

In percent