Switzerland: Economy virtually flat in Q4
March 2, 2017
Switzerland’s gross domestic product grew meagerly in the fourth quarter as improved consumer confidence was weighed down by a still sluggish economic acceleration in the Euro area. According to the State Secretariat for Economic Affairs (SECO), GDP increased 0.1% in Q4 in seasonally adjusted quarter-on-quarter terms, matching Q3’s revised growth (previously reported: 0.0% quarter-on-quarter). On an annual basis, the economy increased 0.6% in Q4, decelerating from Q3’s 1.4% expansion and bringing full year growth to 1.3% in 2016, which matched FocusEconomics panelists’ forecast (2015: 0.8% year-on-year).
Domestic demand was a mixed bag in the last quarter of 2016. In line with consumer confidence climbing recently, private consumption increased 0.9%, which was a solid acceleration from the 0.2% increase registered in Q3 and the best figure in almost five years. According to SECO, the most important drivers were expenditure for health, housing and energy. Conversely, fixed investment performed poorly in the last quarter, swinging from a 0.3% expansion in Q3 to a 0.6% drop in Q4, likely reflecting mounting uncertainty on international trade policies and domestic tax legislation.
The external sector shaved off 0.5 percentage points of the overall result due to a still high Swiss franc against other major currencies and only slowly improving global demand. Exports of goods and services increased 2.8% in Q4 (Q3: 0.0% qoq). Imports in turn grew a solid 4.4% in the fourth quarter, a sharp rebound from the 1.3% contraction seen in Q3. Though the strength in imports weighed on overall GDP growth, it is encouraging that Swiss demand for imports is slowly picking up along with stronger private consumption.
The outlook for Switzerland’s economy is broadly stable. Household expenditure will continue to be driven by increasing real estate prices, which are having a positive wealth effect, and a steady unemployment rate. The external sector should contribute positively to growth in upcoming quarters, supported by the gradual acceleration in the Euro area.