Economy: Chinese economy faces strong headwind

China’s economic problems are persisting. But the outlook for the USA and Europe remains positive.

  • The economic situation in Switzerland remains strong in the third quarter. The impact of the coronavirus pandemic is now evident only in tourism, where the number of international guests remains below the pre-crisis level. Labour market figures are also encouraging. In August and September, the unemployment rate continued the fall it has been experiencing since the start of the year, standing at just 2.6 percent in recent times. Likewise, consumer sentiment was strong, and retail sales in August were up by 1.1 percent on July’s figure. This means that sales remain 4 percent above the pre-crisis level. While most other countries are currently contending with soaring inflation, the Swiss rate remained unchanged in September, at 0.9 percent.

    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 just under 4 percent in the near future. Due to coronavirus-related effects, however, growth will be below our indicator in the third quarter.
    Source: Bloomberg
  • The signs for the economy remain good in the USA. Consumption in particular has been supporting growth recently. Retail sales rose by 0.8 percent in September, after a very positive August, which saw a +2 percent increase. This means that growth compared to the previous year’s level stands at around 14 percent. By contrast, continuing bottlenecks are still holding back production in industry. The automotive sector in particular is being hit hard by the shortage of semi-conductors. Market participants are increasingly focusing on inflation. After hitting 5.3 percent in August, inflation again stood at 5.4 percent in September. There are growing signs that this higher price trend will continue for an extended period. The US Federal Reserve has indicated that the scaling-back of the bond-buying programme, which currently stands at 120 billion US dollars a month, should begin in November or December. 

    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 around 4 percent in the near future. Due to coronavirus-related effects, however, growth will be above our indicator in the third quarter.
    Source: Bloomberg
  • Unlike the USA, the eurozone has not yet reached its pre-crisis level. Only the Scandinavian and Baltic Member States have already recouped the lost ground. In Germany, France and Italy, the gap still stood at 4 percent in the second quarter. European industry also faces global supply shortages, which are hampering efforts to work through the full order books. But these full order books mean the sentiment barometer published by the European Commission remains high, so production looks to be secure for a few more months. European consumers say that they are currently slightly more cautious. In July, retail sales fell moderately in the eurozone, both month-on-month and year-on-year. Germany recorded the biggest decline, with sales in July coming in at –5.1 percent below the prior month’s level. At the same time, inflation rose to 3.4 percent in September. 

    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 just under 5 percent in the near future. Due to coronavirus-related effects, however, growth will be slightly below our indicator in the third quarter.
    Source: Bloomberg
  • The Chinese economy is continuing to lose momentum and is now on the verge of recession. Economic output grew by only 0.2 percent in the third quarter. The low growth is partly due to the impact of a coronavirus outbreak in the Fujian province, which has once again been tackled with extensive measures. A major electricity shortage, which brought production to a standstill at many companies in September, is another contributing factor. New regulations have also caused a slowdown in the significant construction sector. Foreign demand for Chinese products remains very robust, however. Both Chinese imports and exports reached new all-time highs in August. Conversely, beneficiaries are emerging from the Chinese and global energy shortage: countries such as Russia and Saudi Arabia are currently reaping rewards from the sharp rise in energy prices. 

    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 just under 5 percent in the near future. Due to coronavirus-related effects, however, growth will be well above our indicator in the third quarter.
    Source: Bloomberg

Global economic data

IndicatorsSwitzerlandUSAEurozoneUKJapanIndiaBrazilChina  
Indicators
GDP Y/Y 2021Q2
Switzerland
7.7%
USA
12.2%
Eurozone
14.3%
UK
23.6%
Japan
7.6%
India
20.1%
Brazil
12.4%
China  
7.9%
Indicators
GDP Y/Y 2021Q3
Switzerland
n/a
USA
n/a
Eurozone
n/a
UK
n/a
Japan
n/a
India
n/a
Brazil
n/a
China  
4.9%
Indicators
Economic climate
Switzerland
USA
Eurozone
UK
Japan
India
Brazil
China  
Indicators
Trend growth
Switzerland
1.4%
USA
1.6%
Eurozone
0.8%
UK
1.6%
Japan
1.0%
India
5.0%
Brazil
1.1%
China  
4.2%
Indicators
Inflation
Switzerland
0.9%
USA
5.4%
Eurozone
3.4%
UK
3.2%
Japan
–0.4%
India
4.4%
Brazil
10.2%
China  
0.7%
Indicators
Key rates
Switzerland
–0.75%
USA
0.25%
Eurozone
0.00%
UK
0.10%
Japan
–0.10%
India
4.00%
Brazil
6.25%
China  
4.35%
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