Economy: The global economy is lacking momentum

Economic development in China and Europe continues to trend sideways, while there are growing signs from US leading indicators of a further economic slowdown. Accordingly, the global economy is gradually losing momentum. Weak domestic demand worldwide is particularly striking. Only foreign trade has achieved a slight upturn of late, benefiting the Swiss export sector in particular over recent months.

  • The figures published in early September by the State Secretariat for Economic Affairs (SECO) indicated that the Swiss economy grew by 0.7 percent in the second quarter, which was above the long-term trend. While the strong growth is encouraging, it was driven almost exclusively by an increase in exports in the chemical and pharmaceutical sectors. Elsewhere, economic performance was subdued. Without the impetus provided by foreign trade, the Swiss economy would have stagnated again in the second quarter. This pattern looks set to continue at the start of the third quarter. Another notable rise in exports was observed recently, while there’s still no sign of recovery in consumption and investment activity.

    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 percent in the near future.
    Source: Bloomberg
  • The leading US economic indicators continue to point to a significant slowdown. US industrial and construction companies, in particular, expect a decline in business activity over the coming months due to weak order intake. While service providers still expect to achieve moderate growth at the moment, the significant weakening of the labour market could put household consumer spending under pressure. This is mainly because the current level of consumption is not only being supported by rising disposable income, but also by a declining savings rate and a rise in defaults on credit card bills. In view of this subdued economic outlook, the US Federal Reserve is expected to ease its monetary policy this year, despite core inflation standing at over 3 percent.

    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 only a slight uptick in economic growth in the near future (between 0.5 and 1 percent).
    Source: Bloomberg
  • The eurozone’s economy continues to post weak performance. Industrial production is still falling sharply, while Europe’s population is struggling to maintain its current level of consumer spending. However, sentiment in the services sector improved considerably in August. This upturn was mainly driven by French service providers, which had benefited from the Olympic Games being held in Paris, casting doubt over the stability of this improvement. Against this backdrop, the European Central Bank (ECB) faces growing pressure to ease monetary policy again after its first two interest rate cuts in June and September. However, it’s currently being held back by stubborn inflation in the services sector, which remains at over 4 percent.

    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 (between 0 and 0.5 percent) in the near future.
    Source: Bloomberg
  • Growth momentum in the emerging markets has faltered slightly of late. This is mainly due to the economic weakness in China, the biggest emerging market economy. There was no sign of any substantial recovery in August either. The continued, relentless erosion of real estate prices – the main form of saving for China’s middle class – is particularly worrying. Core inflation also dropped again recently and now stands at just 0.4 percent, which is remarkably low for an economy that usually achieves strong growth. The pace of growth in other emerging markets, such as India, Thailand, the Philippines and Chile, has also slowed slightly of late. However, growth performance overall is in line with the long-term trend of these countries.

    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 2024Q1
Switzerland
0.6%
USA
2.9%
Eurozone
0.5%
UK
0.3%
Japan
–0.9%
India
7.8%
Brazil
2.5%
China
5.3%
Indicators
GDP Y/Y 2024Q2
Switzerland
1.9%
USA
3.1%
Eurozone
0.6%
UK
0.9%
Japan
–0.8%
India
6.7%
Brazil
3.3%
China
4.7%
Indicators
Economic climate
Switzerland
USA
Eurozone
=
UK
+
Japan
+
India
+
Brazil
China
+
Indicators
Trend growth
Switzerland
1.3%
USA
1.6%
Eurozone
0.8%
UK
1.8%
Japan
1.1%
India
5.2%
Brazil
1.7%
China
3.8%
Indicators
Inflation
Switzerland
1.1%
USA
2.5%
Eurozone
2.2%
UK
2.2%
Japan
2.8%
India
3.5%
Brazil
4.2%
China
0.6%
Indicators
Policy rates
Switzerland
1.25%
USA
5.0%
Eurozone
3.65% 
UK
 5.0%
Japan
0.3%
India
6.5%
Brazil
10.50%
China
3.35%

Source: Bloomberg

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