Economy: Growth lacking breadth

Despite high tariffs on its key market, the US, the Swiss economy has so far avoided a slump. Advance deliveries to the United States are likely to sustain economic momentum until the end of the year, as many companies had previously replenished  their stocks and  are  now gradually  reducing them. Despite this, the economy has slowed significantly. Both industry and service providers expect a decline in business volumes over the coming months, while domestic demand has lost considerable momentum recently. This  could  indicate a period of stagnation, which is likely to further dampen already low inflationary pressures. However, the latest agreement with the US, which will see import duties for Swiss companies fall from 39 to 15 percent, gives cause for hope.

Growth, sentiment and trend

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The longest government shutdown in US history, lasting 43  days , has prevented the release of official  economic data. Estimates from private providers indicate that the US economy grew significantly again in the third quarter. However, this growth is narrowing. Outside the field  of artificial intelligence and related infrastructure, investment activity has declined significantly. In addition, consumption growth  is being driven primarily by high income households. This is reflected not least in the fact that consumer confidence has recently fallen to the second-lowest level ever recorded. Added to this is the continuing weakness on the labour market. Wage growth has slowed significantly, particularly for lower earners, putting pressure on many households’ purchasing power.

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Economic performance in the monetary union remains below average. Momentum in industry and consumption has continued to weaken recently, with export  volumes in the  autumn falling below  the previous year’s level. Despite the difficult environment, there are signs of a slight improvement in sentiment. Industrial and service companies are looking to the future with slightly more confidence, pointing to a moderate upturn in business activity over the coming months. However, no additional momentum is expected from monetary policy. Contrary to the expectations of the European Central Bank (ECB), inflation weakened only very slightly over the summer and autumn months. The core inflation rate,  which  excludes  volatile energy and food prices, is still above  the ECB’s target.

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Economic performance in the emerging markets remains highly variable. In Asia, India remains the growth engine, recording strong upswings in both industry and the services sector. Indonesia is also performing well, with increasing economic momentum. In China, by far the largest economy among the emerging markets and the second largest in the world, economic momentum  is still subdued,  despite  the  positive  growth rates. Domestic demand in particular is unusually weak, as investment is declining and consumption is growing only slightly. Economic performance is also sluggish in Latin America’s major economies, particularly Brazil and  Mexico.

Growth, sentiment and trend

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