Swiss economy remains on a modest growth path
Published: Thursday, May 30th 2024, 12:30
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The Swiss economy has been growing at a below-average rate for several quarters. A clear dichotomy can be seen here: While the service sector and private consumption are running smoothly, industry and the export sector continue to stutter. Not too much is likely to change in the short term.
Real gross domestic product (GDP) increased by 0.3% in the first quarter of 2024 compared to the previous quarter, as reported by the State Secretariat for Economic Affairs (SECO) on Thursday. Growth was similarly high in the two previous quarters. However, the figures are not entirely new: Seco had already measured 0.2 percent in a quick estimate two weeks ago. Based on updated data, this figure has now been revised slightly upwards.
The figure is also adjusted for sporting events; unadjusted growth was 0.5 percent: the upcoming major events such as the European Football Championship in Germany or the Summer Olympics in Paris have therefore already had a positive impact on GDP in the first quarter - this is likely to be mainly due to licensing income received by the sports associations based in this country.
Industry continues to weaken
In the quarter under review, value added in the manufacturing sector in particular, i.e. traditional industry, declined slightly (-0.2%). Meanwhile, the construction sector expanded slightly (+0.3%) as a result of rising sales in building construction and civil engineering. The energy sector (+2.1%) was the only industrial sector to record very solid growth.
GDP growth was largely supported by the services sector, albeit with a certain degree of heterogeneity between sectors, as Seco emphasizes. While the financial services sector (-0.2%) and business-related services (-0.3%) developed rather weakly, value added in the hospitality industry (+1.3%), health and social services (+0.8%) and public administration (+0.2%) increased at the respective historical average. The retail trade (+1.4%) even saw above-average growth in historical terms.
On the so-called expenditure side - which is divided into consumption, investment and foreign trade - private consumption in particular expanded, which is likely to have benefited from continued low unemployment, among other things. Government consumption (+0.2%) also showed growth, albeit slight. Investment in equipment (+0.8%) was also positive, with more being invested in vehicles, IT and research and development in particular. According to Seco, foreign trade made a negative overall contribution to GDP growth.
Overall, however, the figures are roughly as expected and economists see little to surprise them. The picture of a divided economy is also reflected in the purchasing managers' index (PMI) data of recent months, a robust labor market and weak industrial production in the first quarter of 2024, said UBS economist Allessandro Bee.
Further below-average growth expected
For Gero Jung from Mirabaud, the Swiss economy "remains robust by international standards". Economist Klaus Wellershoff is somewhat less positive. GDP growth is below population growth, he said in a video interview with AWP. "In per capita terms, we haven't grown at all for almost three years."
From today's perspective, however, it is unlikely that the current growth trajectory will change quickly - either in one direction or the other. The recent stabilization of industry in various European countries and the recent significant weakening of the Swiss franc are more positive factors. According to the April data also published on Thursday, export figures are also showing an improvement.
The KOF Barometer, which was also published on Thursday, points slightly in the opposite direction, showing a slight deterioration in May compared to the previous month. The continuing weakness in certain regions (China, etc.) and the ongoing geopolitical dangers in Ukraine/Russia and the Middle East, which could have a negative impact on the investment climate, also speak against a rapid recovery. Alexander Koch from Raiffeisen sums up the situation by saying that there is much to suggest a positive but still below-average growth performance overall.
©Keystone/SDA
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