Switzerland: Growth slows in the second quarter
September 5, 2019
The economy grew 0.3% on a seasonally-adjusted quarter-on-quarter basis in the second quarter, slowing from the downwardly revised 0.4% expansion in the first quarter (previously reported: +0.6% quarter-on-quarter). However, the result marginally surpassed market expectations of 0.2% growth. In annual terms, GDP expanded a paltry 0.3% in Q2, down from the revised 1.0% expansion in Q1 (previously reported: +1.7% year-on-year).
Q2’s deceleration was broad-based, driven by both slowing domestic demand and a weakening external sector. Fixed investment contracted 0.7% in quarterly terms (Q1: +1.6% qoq) on a dip in construction, and equipment and software investment amid heightened global economic uncertainty. Meanwhile, government consumption slowed (Q2: +0.1% qoq; Q1: +0.5% qoq), while inventories exerted a weaker drag on headline growth. Private consumption, on the other hand was stable, increasing 0.3% in the quarter, supported by muted inflationary pressures and a strong labor market.
The external sector also had a drab performance in the second quarter. Exports of goods and services grew 1.8% over the previous quarter in Q2, recovering from the 0.8% decline logged in Q1. The rebound was thanks to strong pharmaceutical and chemical shipments. Conversely, exports of services fell in the quarter. For its part, imports of goods and services rebounded sharply, expanding 5.0% in Q2 (Q1: -2.4% qoq) and ate into the external sector’s contribution to growth.
Q2’s weaker outturn paired with notable downward revisions to Q1’s formerly robust expansion portrays a much weaker Swiss economy in the first half of the year. Economic growth is projected to slow further in H2, weighed on by mounting headwinds due to global trade tensions stunting investment and exports, the latter of which will continue to be dampened by the high value of the Swiss franc.
Author: Lindsey Ice, Economist