Switzerland Economic Outlook
After flatlining in Q4, the economy likely returned to growth in Q1. The services PMI and KOF Economic Barometer averaged higher in the quarter relative to Q4, while the unemployment rate was close to a multi-decade low, which should have supported private spending. Moreover, banking giant Credit Suisse’s financial distress was quickly headed off via a government-backed takeover by UBS. Less positively, consumer confidence was downbeat in Q1, while financial conditions tightened and manufacturing operating conditions worsened amid weak external goods demand. Turning to Q2, available signs point to softening momentum: The manufacturing PMI, services PMI and KOF Economic Barometer all declined in April. In politics, negotiations over a new trade deal with the UK began in May. However, stabilizing trade relations with the EU will remain a far bigger priority.
Inflation came in at 2.6% in April, down from March’s 2.9% and marking the lowest rate since April 2022. Inflation is muted by international standards, but remains above the Central Bank’s target of less than 2%. Inflation is expected to move close to the Swiss National Bank (SNB)’s target range later this year.