The leading indicators also point to slower growth in Switzerland. By international comparison, however, Swiss companies and households remain relatively optimistic. Consumer confidence has fallen to its lowest level for a year, even hitting a 10-year low in the USA and eurozone.

In 2015, the Swiss National Bank (SNB) introduced negative interest rates to halt the appreciation of the Swiss franc. The Swiss franc – measured by purchasing power – is currently at its weakest for 30 years, which means that the reason for introducing negative interest rates is no longer valid. For this reason, the SNB may raise interest rates on 16 June for the first time in 15 years.

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Demand for products and services remains strong in the USA. As the domestic economy was unable to meet US consumer demand, imports rose sharply during the first quarter, taking the trade deficit to its highest ever level. If the sentiment surveys on consumer mood prove correct, domestic demand looks set to wane soon. In light of high inflation, households have not been as pessimistic since the 2008/2009 financial crisis.

On top of the downturn in demand, the US Federal Reserve’s monetary policy is increasingly having a restraining effect. The Fed has already raised interest rates twice since the start of the year, with more hikes on the way. It’s also set to start offloading the government bonds purchased during the coronavirus pandemic. The planned rate of the sell-off would reduce the size of the Federal Reserve’s balance sheet to the same as before the pandemic by the end of 2024.

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Until the outbreak of the Ukraine war, the sentiment indicators for the eurozone were at a record high, but they have since fallen sharply. This highlights how the war is having a greater impact on Europe than other world regions due to its geographical proximity. The downturn risks remain high: if Russia turns off the gas supplies to other European countries besides Poland and Romania, the EU may face a recession.

This increasingly leaves the European Central Bank (ECB) facing an irresolvable dilemma. While the modest growth prospects would require a supportive monetary policy, reining in high inflation calls for a more restrictive approach. The ECB is likely to make a first interest rate hike in July – which is earlier than previously announced. Inflation recently hit 7.5 percent, the highest level since the EU was founded in 1992.

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The strict coronavirus policy imposed by President Xi Jinping means that the Chinese economy is now facing a recession. Industrial production fell by 2.9 percent year-on-year, while retail sales slumped by as much as 11.2 percent. Extensive economic stimulation measures were announced, but these have had little impact so far.

In contrast, inflation is the predominant issue in almost all other emerging markets. Whereas Indonesia banned the export of palm oil, wheat can no longer be exported from India – over fears that the local population would otherwise no longer be able to afford the products. This triggered fresh food price rises and further exacerbated the situation in countries dependent on food imports.

Growth, sentiment and trend

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