Domestic Demand in Switzerland

Switzerland - Domestic Demand

Economic growth accelerates in the first quarter

GDP growth accelerated to 0.5% on a seasonally-adjusted quarter-on-quarter basis in the first quarter, from 0.2% in the fourth quarter of last year.

Household spending increased 0.4% in the first quarter, which was above the fourth quarter's 0.3% expansion and was likely supported by the fading economic impact of the pandemic amid the lifting of virtually all remaining Covid-19 restrictions from mid-February. Public spending edged up to a 1.4% increase in Q1 (Q4 2021: +1.3% s.a. qoq). Meanwhile, fixed investment contracted 2.2% in Q1, marking the worst result since Q2 2020 (Q4 2021: +2.8% s.a. qoq), amid lower investment in both equipment and construction.

On the external front, exports of goods and services growth fell to 0.2% in Q1, marking the worst result since Q2 2020 (Q4 2021: +3.5% s.a. qoq). A contraction in services exports more than offset faster growth in goods exports. In addition, imports of goods and services growth moderated to 0.6% in Q1 (Q4 2021: +9.5% s.a. qoq).

On an annual basis, economic growth picked up to 4.5% in Q1, compared to the previous period's 3.8% increase.

Looking to Q2, quarterly growth is forecast to be broadly in line with the Eurozone average. While the removal of Covid-19 restrictions and the lowest unemployment rate in over two years will buttress domestic activity, plunging consumer sentiment amid concerns over the economic outlook and price pressures could take the shine off private consumption. Moreover, government consumption is likely to fall due to lower pandemic-relating spending.

FocusEconomics Consensus Forecast panelists expect the economy to expand 2.6% in 2022, which is unchanged from last month’s forecast. In 2023, the panel expects GDP to expand 1.8%.