Switzerland Economic Outlook
The economy lost steam in Q4 amid tighter monetary policy and slowdowns abroad, with average readings for the manufacturing and services PMIs lower than in Q3. However, PMI data still pointed to improving business conditions. In addition, rock-bottom unemployment and an inflation rate less than a third of the EU average will have propped up private spending, while services exports likely benefited from higher tourism flows. Turning to 2023, available data is fairly positive. Both the KOF Economic Barometer and the services PMI surged in January, with the services PMI benefiting from faster growth in business activity and employment. Less positively, the January manufacturing PMI indicated worsening operating conditions in the manufacturing sector.
Inflation came in at 3.3% in January, up from 2.8% in December and driven by faster food and housing inflation. However, January’s uptick should be short-lived: Inflation is expected to fall back to the Swiss National Bank (SNB)’s target of below 2.0% in H2 due to reduced supply constraints and weaker demand.