The Swiss economy continues to perform well by international standards, but a considerable slowdown in growth is expected here, too. Consumer confidence remains at an historic low, and household spending fell in real terms in December. Business sentiment is gloomy, and order intake in industry has been disappointing recently. At least one positive note is that inflation in Switzerland is much lower than abroad. While this will likely lead to further increases in interest and mortgage rates even in Switzerland, these aren’t expected to be as high as in the USA or the eurozone. However, there’s a risk of low inflation leading to a much stronger Swiss franc over the medium term.

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US inflation fell again in December. This is partly explained by lower oil prices, but also by the fact that the economy now actually appears to be slowing down. Survey results in industry and amongst service providers clearly point to a contraction in economic output. There was an obvious slowdown in industrial production, capacity utilization and order intake last month. Only the labour market remains robust, but this reflects historical trends. In the USA, rising unemployment has often occurred only after a recession has begun. With the labour market still in good shape and continued strong excess consumer demand for goods, we expect the US Federal Reserve to make further interest rate hikes.

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Inflation remains the major issue in Europe. This dropped below the 10-percent mark in terms of consumer prices, due to lower oil and gas prices. But inflation for other everyday goods and services climbed to 5.2 percent. In light of these figures, the European Central Bank is likely to make further significant interest rate hikes. Just as a reminder, money market rates currently stand at just 2.25 percent. We’ve recorded a very slight improvement in business sentiment, which is probably due to lower energy prices and the fact that a shortage of electricity and gas has so far been avoided. However, the level of business and consumer confidence still points to negative growth in future.

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The economic situation in China has deteriorated considerably again. It’s now clear that the lifting of coronavirus measures has led to more rapid spread of the disease. This seems to be having an impact on both demand and production. The slump in the services sector – with a huge drop in the government-produced sentiment index – and the extremely sharp downturn in foreign trade are particularly noteworthy. Nominal exports and imports are now in negative territory for the third month in a row. Considering that goods inflation is still very high globally, this means that there has been a very significant decline in Chinese economic activity in real terms. The construction industry is also being hit by the current situation.  

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