Swiss economic data remains exceptionally volatile, making it difficult to form a coherent overall picture. However, there are still no clear signs of a recovery in subdued economic performance. Business in the export-led industrial sector remains especially weak. The services sector, driven by domestic consumption, is slightly more stable. Above all, the weak economy is having a positive effect on the inflation trend. With inflation currently standing at 1.3 percent, the Swiss National Bank (SNB) is the only major central bank to have achieved its price stability target. The SNB recently cut its policy rate from 1.5 to 1.25 percent due to the weak economy and low inflation. 

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Economic data from the USA was disappointing again last month, pointing to a substantial slowdown in domestic demand. Falling retail sales and declining activity in the construction sector were particularly evident. The prospects of companies in the services sector have grown much more pessimistic, too. They now anticipate a decline in business activity over the coming months, as their counterparts in industry have done for some time. It means the labour market remains crucial for the US economy. This has also shown growing signs of weakness recently. Far fewer new jobs were created during the second quarter compared to the first, and unemployment has risen. However, utilization of labour market capacity remains solid for the time being.

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The European economy has stabilized so far this year and has bottomed out. However, there have been no signs of a strong recovery yet. The situation did not change much last month either. Industry, in particular, remains sluggish. Production in the manufacturing sector fell again recently and the outlook among industrial companies took a negative turn. In contrast, the services sector has returned to a moderate growth trajectory this year, which is encouraging. These sectoral differences are also reflected in the inflation rate. While goods prices barely rose, inflation for services stands at over 4 percent on average. The continued sharp price increases in the services sector may make it difficult for the European Central Bank (ECB) to further ease its monetary policy over the coming months. 

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China’s economy, the biggest among the emerging markets and the world’s second-largest, is still failing to make any progress. This applies in particular to the real estate and construction sector, which is facing a severe crisis. The number of new apartments built is now more than 60 percent lower than before the COVID-19 pandemic. The collapse in real estate prices continued last month, too. Recently, services companies have also grown more pessimistic about future prospects. In light of the weak domestic economy, impetus for economic growth is only expected to come from export markets at the moment. There was, at least, a substantial rise in export volumes in May. 

Growth, sentiment and trend

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