Consumption in Switzerland

Switzerland - Consumption

Growth picks up in Q1

The economy grew 0.6% in Q1 2019 over the previous quarter in seasonally-adjusted terms, according to data released by the State Secretariat for Economic Affairs (SECO) on 28 May. This marked an acceleration from the upwardly revised 0.3% expansion recorded in Q4 (previously reported: +0.2% quarter-on-quarter) and exceeded market expectations of 0.4% growth. In annual terms, GDP increased 1.7% in Q1, up from the revised 1.5% logged in Q4 (previously reported: +1.4% year-on-year) and beat market expectations of 1.0% growth.

Q1’s acceleration came largely on the back of a rebound in gross fixed capital formation and faster private consumption growth. Gross fixed capital formation grew 1.1% in Q1, contrasting Q4’s 0.1% contraction, on the back of stronger investment in equipment and software, and construction. Private consumption growth ticked up in the quarter amid a tight labor market and mild inflationary pressures (Q1: +0.4% qoqsa; Q4 +0.3% qoqsa). Government consumption growth was unchanged at 0.3%, while the drag from inventories lessened.

The external sector strengthened, as exports rebounded to post a 0.1% quarter-on-quarter increase in Q1 (Q4: -2.1% qoqsa), likely buoyed by stronger-than-expected economic growth in the Eurozone and a solid manufacturing sector. Meanwhile, imports of goods and services decreased 2.6% in Q1 but less severely than Q4’s 6.6% decline.

Despite Q1’s surprisingly robust outturn, growth is seen slowing this year compared to last. Although this is partly the result of a tough base effect—after the FIFA World Cup and the Winter Olympics boosted growth in 2018—mounting headwinds due to global trade tensions and a projected slowdown in global growth will likely stunt investment and exports.

The State Secretariat for Economic Affairs expects the economy to expand 1.1% in 2019 and 1.7% in 2020. FocusEconomics Consensus Forecast panelists expect GDP to expand 1.2% in 2019, which is unchanged from last month’s forecast, and project growth of 1.5% in 2020.