Economy: Pleasant surprises will be less frequent in future

Consumption in Europe and the USA recovered quickly after the relaxation of lockdown measures. Developments in industry and new coronavirus outbreaks are a cause for concern.

  • Consumption recovered more quickly in Switzerland than in other countries. In May, retail sales were over 30 percent up on April, when they were almost 20 percent below the usual level. Retail may have benefited from catch-up effects in May.

    The number of job seekers rose by 53,000 compared to June in the previous year, representing an increase of 54 percent. This rise reflects the impact of the coronavirus crisis, even though unemployment remains moderate at 3.2 percent. Around a million employees are still on short-time working, which equates to around 20 percent of the entire workforce. The crucial factor for the future development of the employment market is whether companies can continue to employ these staff when short-time working ends. This will not become clear for a while yet, as the Federal Council has recently extended the maximum eligibility period for short-time working from 12 to 18 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 –2 percent in the near future. However, in light of coronavirus, the indicator is now too optimistic.
    Source: Bloomberg
  • The USA fared surprisingly well in June, posting generally positive figures. Both major leading indicators, ISM Manufacturing and Non-Manufacturing, have already returned to pre-crisis levels. Retail sector figures were also strong again.

    On closer analysis, however, the situation is less optimistic. The fact that the ISM indicators performed so strongly is due to their design. In the retail sector too (which, in the USA, also includes restaurants), pleasant surprises may be few and far between in future. The southern states, in particular, are currently faced with huge increases in the number of coronavirus cases. Real-time data for these states shows that consumption levels are already falling again, after a tentative recovery in June. The industry and export figures also remain very weak.

    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. Our economic indicator points to economic growth of 2 percent in the near future. However, in light of coronavirus, the indicator is clearly too optimistic.
    Source: Bloomberg
  • The economic differences within the eurozone are currently very stark: by global comparison, the eurozone includes countries – such as Germany, Austria, Denmark and Sweden – that are amongst those which have so far overcome the coronavirus crisis most successfully from an economic perspective. But it also includes countries which are amongst the strongly affected in the world, such as Italy, Spain and France.

    Consumption is currently recovering across the board. In May, retail sales were up on April, even though pre-crisis levels have not yet been reached everywhere. The situation is more challenging in industry, in which the production level is between 10 and 25 percent below the previous year’s level everywhere. This is reflected in the fact that the eurozone’s exports in May were almost 30 percent below the pre-crisis level. This means the downturn is more severe than during the 2008/2009 financial crisis.

    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. Our economic indicator points to economic growth of –2 percent in the near future. However, in light of coronavirus, the indicator is too optimistic.
    Source: Bloomberg
  • Many emerging markets are being hit extremely hard by coronavirus. In response, many central banks have cut the key rate to a new record low, including Brazil, Indonesia, Thailand and India. The Turkish central bank has also begun massively expanding monetary supply. This activism is not without risk, as such measures in emerging markets can lead to currency devaluation and financial stability problems relatively quickly.

    According to official figures, Chinese economic growth stood at a surprisingly high 3.2 percent year-on-year. Industry in particular has recovered well from the slump in February. Recent export figures were also strong. On the other hand, retail sales are still a long way off returning to their pre-crisis level, and investment activity also remains weak.

    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. Our economic indicator points to economic growth of around 2 percent in the near future. However, in light of coronavirus, the indicator is too optimistic.
    Source: Bloomberg

Global economic data

Indicators Switzerland USA Eurozone UK Japan India Brazil China    
Indicators
GDP Y/Y 2020Q1
Switzerland
–1.3%
USA
0.3%
Eurozone
–3.1%
UK
–1.7%
Japan
–1.7%
India
3.1%
Brazil
–0.3%
China   
–6.8%
Indicators
GDP Y/Y 2020Q2
Switzerland
n.a.
USA
n.a.
Eurozone
n.a.
UK
n.a.
Japan
n.a.
India
n.a.
Brazil
n.a.
China   
3.2%
Indicators
Economic climate
Switzerland
USA
+
Eurozone
UK
=
Japan
+
India
+
Brazil
China   
+
Indicators
Trend growth
Switzerland
1.4%
USA
1.7%
Eurozone
0.8%
UK
1.6%
Japan
1.0%
India
5.0%
Brazil
1.0%
China   
4.3%
Indicators
Inflation
Switzerland
–1.3%
USA
0.6%
Eurozone
0.3%
UK
0.6%
Japan
0.1%
India
6.1%
Brazil
2.1%
China   
2.5%
Indicators
Key rates
Switzerland
–0.75%
USA
0.08%
Eurozone
0.00%
UK
0.10%
Japan
–0.10%
India
4.00%
Brazil
2.25%
China   
4.35%

Source: Bloomberg

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