Economy: Inflation soars

A year ago, coronavirus caused oil and commodity prices to collapse. Prices and the global economy have both since recovered, which has resulted in a rise in inflation rates year-on-year. Some emerging markets have been forced to raise key rates due to rising inflation.

  • The Swiss retail sector suffered another sharp decline in revenue in February due to shop closures, falling -6.3% compared to the previous year. Shops reopened on 1 March, and significant catch-up effects are anticipated, as happened last year. Thanks to the reopening, economic output in the first quarter will decline less steeply than originally feared. The real-time indicator on weekly economic activity published by SECO points to negative quarterly growth of “just” -0.5% in the first quarter. Surprisingly, seasonally-adjusted unemployment fell in March from 3.4 to 3.3%. The inflation rate recently stood at -0.2%. Although prices are set to rise in the near future, inflation in Switzerland is very low by international comparison.

    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 zero percent in the near future.
    Source: Bloomberg
  • March revenues in the US retail sector were up 9.8% on the previous month and reached a new record high. Industrial production exceeded the pre-crisis level, climbing by 1% year-on-year. This means that the coronavirus crisis in the USA has largely been overcome from an economic perspective – unlike in Europe. 

    The outlook is also bright. ISM Manufacturing, which measures sentiment amongst industrial companies, climbed to its highest level since 1983 in March. Only the unemployment figure is still well above the pre-crisis level. However, with almost a million new jobs created in March, the trend also points to recovery in this area. Inflation soared in March, rising from 1.7 to 2.6%. Provided that inflation remains above 2% temporarily, however, the US Federal Reserve is not expected to raise interest rates.

    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 economic growth of almost 5 percent in the near future. Due to coronavirus-related effects, however, growth will be well below our indicator in the first quarter and well above it in the second quarter.
    Source: Bloomberg
  • As in the USA, industry in the eurozone is in a buoyant mood – the indicator reached a 24-year high in March. The situation in the services sector is completely different, however. Owing to fresh lockdown measures, retail revenues in March came in at around 3% below the already weak figures for the same month in the prior year. It is also clear that the economies in central and eastern European countries are currently being just as severely affected as their southern European counterparts, which were hit much worse in 2020. For example, retail revenues in March stood at a similarly negative level in Germany (-5.3%) and in Italy (-5.6%), whereas France’s figures were actually in positive territory, at 1.6%. 

    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 economic growth of around 1 percent in the near future. Due to coronavirus-related effects, however, growth will be well below our indicator in the first quarter and well above it in the second quarter.
    Source: Bloomberg
  • According to official figures, China’s first-quarter economic output was up by 0.6% on the previous quarter. Despite strong momentum, China is still not yet building on the high pre-pandemic growth rates. During the first quarter, the Chinese government imposed drastic measures in response to new local outbreaks of coronavirus. The government also advised citizens against travel during the Chinese New Year celebrations. Consumption continues to recover, but has not yet reached pre-coronavirus normality.

    In Brazil, where a new variant of the virus is rampant, sentiment has deteriorated significantly in recent times. The index that measures sentiment in industry fell from 58.4 to 52.8 points, while the services sector index slipped from 47.1 to 44.1 points. No impetus is expected from monetary policy, despite the challenging situation. The central bank was compelled to raise the key rate from 2 to 2.75% owing to high inflation (most recently 6.1%) and a depreciating currency. 

    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 around 4 percent in the near future. Due to coronavirus-related effects on Chinese GDP, however, growth will be well above our indicator in the first quarter.
    Source: Bloomberg

Global economic data

IndicatorsSwitzerlandUSAEurozoneUKJapanIndiaBrazilChina
Indicators
GDP Y/Y 2020Q4
Switzerland
–1.6%
USA
–2.4%
Eurozone
–4.9%
UK
–7.3%
Japan
–1.4%
India
0.4%
Brazil
–1.1%
China
6.5%
Indicators
GDP Y/Y 2021Q1
Switzerland
USA
Eurozone
UK
Japan
India
Brazil
 
China
18.3%
Indicators
Economic climate
Switzerland
=
USA
+
Eurozone
=
UK
+
Japan
=
India
+
Brazil
=
China
+
Indicators
Trend growth
Switzerland
1.4%
USA
1.6%
Eurozone
0.9%
UK
1.6%
Japan
1.0%
India
5.0%
Brazil
1.0%
China
4.2%
Indicators
Inflation
Switzerland
–0.2%
USA
2.6%
Eurozone
1.3%
UK
0.4%
Japan
–0.4%
India
5.5%
Brazil
6.1%
China
0.4%
Indicators
Key rates
Switzerland
–0.75%
USA
0.25%
Eurozone
0.00%
UK
0.10%
Japan
–0.10%
India
4.00%
Brazil
2.75%
China
3.85%
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