Economy: Ray of hope in industry

Manufacturing is under huge pressure in many countries. The world’s biggest exporters of goods, China and Germany, are actually in recession. That’s partly due to the aftermath of the COVID-19 pandemic. During this period, many people cut their consumption of services both voluntarily and due to government restrictions, and substituted it for the consumption of goods. The resulting saturation has unsurprisingly led to a sharp decline in global demand for goods over recent months. However, sentiment indicators in industry improved on a broad basis for the first time in January. Goods prices also seem to be gradually stabilizing. While that’s good news for the global economy, it may make it harder to bring down inflation further.

  • Swiss economic performance remains sluggish. Unlike many European countries and the USA, sentiment in industry hasn’t improved recently. Order volumes and capacity utilization remain very low, reflecting the sustained downturn in manufacturing. The sector’s performance would be even weaker without the chemicals and pharmaceutical sector, which is less sensitive to economic conditions. On a positive note from this perspective, the Swiss franc didn’t appreciate further in the first few weeks of the new year. The services sector, which is more heavily focused on domestic consumption, is currently steady. This is despite the fact that Swiss consumer confidence remains low and inflation is likely to rise slightly again at the start of the year due to the adjustment to many administered prices – such as electricity prices, VAT and public transport fares.

    Growth, sentiment and trend

    In percent

    The graphic shows the actual annual growth in Swiss gross domestic product (GDP) since 1995, its long-term trend and a leading economic climate indicator. The leading indicator points to economic growth of around –1.0 percent in the near future.
    Source: Bloomberg
  • The US economy performed strongly again, growing by 0.8 percent in the fourth quarter of last year. The gains made by the world’s biggest economy over the second six months of  2023 would normally take an entire year based on the long-term average. Growth was supported by all demand components, with private consumption, in particular, rising sharply again. Strong wage growth, which is currently outstripping inflation, may also support demand over the coming months. Besides positive numbers from the real economy, the mood in industry, among service providers and consumers also improved. However, this strong overall picture may keep price pressure high, presenting a growing challenge for the US Federal Reserve (Fed). Efforts to tackle inflation have been much less successful in recent months. Core inflation fell from 4.1 to just 3.9 percent from September  to December 2023. 

    Growth, sentiment and trend

    In percent

    The graphic shows the growth in real US GDP, its long-term trend and a leading economic climate indicator since the mid-1990s. The leading indicator points to stagnating economic growth (0 percent) in the near future.
    Source: Bloomberg
  • The recently published growth figures for the fourth quarter of 2023 show the huge impact of weak global demand for goods on the European economy. This resulted in zero growth for the eurozone as a whole, while Germany, the area’s biggest economy, actually contracted by 0.3 percent. However, the latest economic figures weren’t all bad news for once, as sentiment numbers and the business climate in industry were much more positive in January. This is the first clear improvement in sentiment in over a year. It’s supported by hopes that the persistent recession in manufacturing will not worsen over the coming months. We’re also seeing another positive sign in goods prices, whose downward trend came to a halt recently, and have now stabilized. Whether this represents a sustained trend reversal in the European economy remains to be seen over the coming months.

    Growth, sentiment and trend

    In percent

    The graphic shows the growth in real GDP, its trend and a leading economic climate indicator for the eurozone since 1995. The leading indicator points to stagnating economic growth (0 percent) in the near future.
    Source: Bloomberg
  • Many emerging markets continue to significantly outperform industrial nations in terms of economic performance. The Indian economy, which posted impressive growth of 7.3 percent last year, is a major growth driver. China, the world’s second biggest economy, is still facing major challenges though. On one hand, the situation in the crisis-hit real estate sector looks unlikely to improve soon. On the other, the economy remains weak, which is clearly reflected in the price trend. In January, Chinese inflation fell to –0.8  percent, remaining in deflationary territory. And there is no sign of any significant economic support measures from fiscal or monetary policy. The Chinese government appears to have resigned itself to the downturn to avoid further investment and prevent the real estate market from overheating even more.

    Growth, sentiment and trend

    In percent

    This graphic shows the growth in real GDP, its trend and a leading economic climate indicator for an average of emerging markets since 1995. The leading indicator points to economic growth of between 4 and 5 percent in the near future.
    Source: Bloomberg

Global economic data

IndicatorsSwitzerlandUSAEurozoneUKJapanIndiaBrazilChina
Indicators
GDP Y/Y 2023Q3
Switzerland
0.3%
USA
2.9%
Eurozone
0.0%
UK
0.3%
Japan
1.2%
India
7.6%
Brazil
2.0%
China
4.9%
Indicators
GDP Y/Y 2023Q4
Switzerland
n/a 
USA
3.1%
Eurozone
0.1%
UK
n/a 
Japan
n/a 
India
n/a 
Brazil
n/a 
China
5.2%
Indicators
Economic climate
Switzerland
USA
Eurozone
+
UK
=
Japan
+
India
-
Brazil
China
+
Indicators
Trend growth
Switzerland
1.3%
USA
1.6%
Eurozone
0.8%
UK
1.7%
Japan
1.1%
India
5.2%
Brazil
1.5%
China
3.8%
Indicators
Inflation
Switzerland
1.3%
USA
3.1%
Eurozone
2.8%
UK
4.0%
Japan
2.6%
India
5.7%
Brazil
4.5%
China
–0.8%
Indicators
Policy rates
Switzerland
1.75%
USA
5.50%
Eurozone
4.5%
UK
5.25%
Japan
–0.1%
India
6.5%
Brazil
11.25%
China
4.35%

Source: Bloomberg

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