Switzerland Economic Forecast

After mild growth in Q1, the economy flatlined in Q2 on a seasonally adjusted quarter-on-quarter basis, undershooting market expectations. Weaker readings for private consumption, public spending, fixed investment and exports drove the slowdown. Factors such as higher interest rates, soft overseas goods demand and the strong franc hitting exports likely all played a role in dampening economic activity in Q2. Turning to the third quarter, available figures are downbeat. Retail sales fell month on month in July, while surveys of businesses in the manufacturing and services industries pointed to deteriorating operating conditions for firms in July–August. That said, below-2% inflation and one of the lowest unemployment rates in Europe should be propping up private spending.

Inflation held steady at July’s 1.6% in August, above market expectations but in line with the Central Bank’s below-2% inflation target. August’s result was the joint-weakest inflation rate since December 2021. Inflation is forecast to average below 2% for the remainder of the year, with the recent uptick in oil prices partly offset by tighter monetary policy.