Switzerland: GDP flatlines in the second quarter
GDP was stable in Q2 relative to Q1 on a seasonally adjusted quarter-on-quarter basis (Q1: +0.3% s.a. qoq), undershooting market expectations. On an annual basis, economic growth lost steam, cooling to 0.6% in Q2, following the previous quarter’s 1.4% growth. Q2’s reading marked the worst reading since Q1 2021. Higher domestic interest rates and soft external goods demand weighed on the economy in the second quarter.
The sequential downturn was broad-based, with private consumption, public spending, fixed investment and exports all weakening. Household spending growth fell to 0.4% in Q2, marking the weakest expansion since Q4 2021 (Q1: +0.6% s.a. qoq). That said, the expansion was still robust, supported by mild price pressures and rock-bottom unemployment. Public consumption growth eased to 0.1% in Q2 (Q1: +0.4% s.a. qoq). Meanwhile, fixed investment contracted 2.8% in Q2 (Q1: +1.6% s.a. qoq), due to lower investment in construction and fixed assets and software.
Exports of goods and services fell 2.5% on a seasonally adjusted quarterly basis in the second quarter, which contrasted the first quarter’s 1.8% expansion. Falling goods exports more than offset rising services exports. In addition, imports of goods and services deteriorated, contracting 7.0% in Q2 (Q1: +3.4% s.a. qoq).
Looking ahead, our panelists expect a slight quarter-on-quarter expansion in GDP in Q3, though the economy will continue to be restrained by past interest rate hikes and muted export demand.
On the reading and outlook, ING’s Charlotte de Montpellier said:
“While the Swiss economy has largely outperformed its European neighbours since the pandemic (Swiss GDP has risen by 5.6% since the end of 2019, compared with 3.1% for the eurozone), it now seems to have been caught up by major headwinds, namely the global economic slowdown and interest rate rises. It is only the strength of the service sector caused by the post-pandemic recovery, and in particular tourism, that has enabled Switzerland to avoid a contraction in GDP in the second quarter. The Swiss economy is likely to remain sluggish over the next few quarters.”