Switzerland: Economic growth softens in Q2 due to upward revision of Q1 data, but remains solid nevertheless
September 6, 2018
The economy of Switzerland continued to grow robustly in the second quarter, after having recorded exceptional growth in the first quarter—which was revised significantly upwards to an eight-year high of 1.0% quarter-on-quarter (previously reported: +0.6% quarter-on-quarter). According to data released by the State Secretariat for Economic Affairs (SECO) on 6 September, seasonally-adjusted economic growth came in at 0.7% on a quarter-on-quarter basis in Q2, thus decelerating from Q1’s revised print but nevertheless surpassing analysts’ expectations of a slightly softer 0.5% expansion. In year-on-year terms, the economy expanded 3.4%, also reaching an eight-year high, up from Q1’s revised 2.9% print (previously reported: +2.2% year-on-year) and well ahead of expectations of 2.4%.
Growth in the quarter was buttressed not only by resilient domestic dynamics, but by a notably strong performance of the external sector. Private consumption growth moderated slightly from 0.4% (quarter-on-quarter seasonally-adjusted) in Q1 to 0.3% qoqsa in Q2, supported by the excellent state of the Swiss labor market, while government spending growth was stable at Q1’s 0.1% (qoqsa) in Q2. One of the main weak points of the Q2 GDP reading was fixed investment growth, which almost grinded to a halt in the quarter, reaching a meager 0.1% qoqsa after a much stronger 1.2% attained in Q1. This relatively poor performance, however, can be explained by an unfavorable base effect following the solid showing in the first quarter; as well as by drawdowns in inventories, which shrank 0.8%, contrasting a 0.6% expansion logged in Q1 and detracting from the overall print. Nevertheless, although construction investment picked up, firms’ spending on equipment and intellectual property declined compared to the first quarter.
Looking at the external sector, its strong showing was mainly driven by a rebound in exports, which expanded 0.5% in Q2 (qoqsa) after contracting 1.9% in Q1. Exports of services largely stabilized after a contraction in Q1, while exports of goods picked up pace quite markedly. Meanwhile, imports contracted 0.3% in the second quarter, matching the previous quarter’s print. However, import composition did evolve, as goods imports contracted in Q2 after a strong Q1 reading, while conversely service imports rebounded from Q1’s large contraction to record a modest growth.
Author: Joffrey Simonet, Economist