Economy: Mixed economic signals

Economic data has not indicated any clear direction in the past few months: the US economy appears to be achieving strong growth, but we are seeing a significant deterioration in business sentiment and consumer confidence. While the economy continues to stabilize in Europe and China, the potential recovery is very sluggish and keeps suffering setbacks. And, after temporarily bottoming out, Switzerland is on a gradual downward trend again. The global economy remains stuck in a rut for the time being. However, this is not unusual when there are wide regional variations in economic cycles.

  • After stabilizing to some extent towards the end of 2023, the Swiss economy is facing more signs of weakness in the new year. Industrial companies in particular are still being hit hard by the continued recession in the manufacturing sector. This is illustrated by the recent significant deterioration in sentiment in the industrial sector and a sharp decline in goods exports during the first quarter of 2024. In this context, there are even fears that Swiss economic growth may now have entered negative territory, at least based on the most recent short-term indicator from the State Secretariat for Economic Affairs’ (SECO). Yet, how weak the Swiss economy actually is also depends heavily on the performance of the services sector. The sector’s performance is currently difficult to estimate as the sentiment values of services companies have fluctuated unusually sharply over recent months.

    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 latest economic data from the USA disappointed market expectations. The US economy grew by 0.4 percent in the first quarter, which is much less than anticipated. However, annualized growth of 1.6 percent is still roughly in line with the long-term trend. The US economy continues to have a high level of capacity utilization, but there is a considerable deterioration in business sentiment at the moment. The business outlook is much gloomier in both the industrial and services sectors. The recent labour market figures are also much lower than in previous months. The inflation trend shows little sign of weakening again. Barely any progress has been made on tackling it in recent months. There is, in turn, a risk of inflation becoming entrenched at just below 4 percent, which is twice the US Federal Reserve’s target.

    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 a low level of economic growth (1 percent) in the near future.
    Source: Bloomberg
  • The eurozone’s economy appears to be gradually stabilizing. The overall economy grew by 0.3 percent in the first quarter of 2024, which is the first significant improvement in economic performance for almost two years. Sentiment among companies is also gradually improving. Services companies in particular were much more optimistic in April. The first signs of bottoming out in Germany, Europe’s biggest economy, is a further positive development. By contrast, the industrial sector throughout the entire eurozone continues to face challenges in recovering from the global downturn in the goods cycle. This means the economic recovery remains on shaky foundations. The inflation trend remains encouraging. The core inflation rate fell again in April and now stands at 2.7 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 (0.5 percent) in the near future.
    Source: Bloomberg
  • China’s economy – by far the biggest amongst the emerging economies – is struggling to gain any real momentum. While the officially published first quarter growth rates of 1.6 percent appear impressive, a closer analysis of the Chinese economy reveals a somewhat gloomier picture. Investment and consumer activity remain weak and goods exports are well below the previous year’s level. At an annual growth rate of 0.1 percent, inflation also remains uncomfortably low. Only sentiment data points to the likelihood of improved economic performance.

    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 5 and 6 percent in the near future.
    Source: Bloomberg

Global economic data

IndicatorsSwitzerlandUSAEurozoneUKJapanIndiaBrazilChina
Indicators
GDP Y/Y 2023Q4
Switzerland
0.6%
USA
3.1%
Eurozone
0.1%
UK
–0.2%
Japan
1.0%
India
8.4%
Brazil
2.1%
China
5.2%
Indicators
GDP Y/Y 2024Q1
Switzerland
n/a 
USA
3.0%
Eurozone
0.4%
UK
n/a 
Japan
n/a 
India
n/a 
Brazil
n/a 
China
5.3%
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
1.6%
China
3.8%
Indicators
Inflation
Switzerland
1.4%
USA
3.4%
Eurozone
2.4%
UK
3.2%
Japan
2.7%
India
4.9%
Brazil
3.9%
China
0.1%
Indicators
Policy rates
Switzerland
1.5%
USA
5.5%
Eurozone
4.5%
UK
5.25%
Japan
–0.1%
India
6.5%
Brazil
10.75%
China
3.45%

Source: Bloomberg

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