Economy records fastest upturn since Q2 2022 in the second quarter

Economy outperforms neighbors: GDP growth clocked 0.7% on a seasonally adjusted quarter on quarter basis in the second quarter, up from 0.5% in the first quarter and marking a two-year high. The reading was flattered by the impact of sporting events, as both UEFA and the International Olympic Committee are headquartered in Switzerland. Adjusting for sporting events, the economy grew 0.5% in Q2, which was still more than double the corresponding figure in the Euro area. On an annual basis, economic growth accelerated to 1.7% in Q2, up from the previous quarter's 0.7% growth and marking the fastest growth since Q3 2022.

Drivers: Household spending increased 0.3% in the second quarter, which was below the first quarter's 0.5% expansion. Public spending expanded 0.2% (Q1: +0.2% s.a. qoq). Meanwhile, fixed investment slid 0.8% in Q2, contrasting the 0.2% increase logged in the prior quarter. Exports of goods and services contracted 3.4% in Q2 (Q1: +2.9% s.a. qoq), due to lower gold exports. In addition, imports of goods and services deteriorated, contracting 9.1% in Q2 (Q1: +5.4% s.a. qoq).

Solid growth expected ahead: Our Consensus is for GDP growth to slow in the third quarter, but to continue to outpace the Euro area average. This outperformance should be supported by Switzerland’s relatively low inflation, interest rates and unemployment, as well as the country’s highly competitive chemical and pharmaceutical industries.

Panelist insight: On the demand outlook, EIU analysts said: “In the upcoming wage negotiations for 2025, trade unions will demand compensation for the loss of real income (–0.4% in 2023), which could stimulate domestic demand if firms agree higher wage increases. However, given the experience from the past as well as the latest KOF Swiss Economic Institute business survey, nominal wage increases are likely to average just 1.6%, which may translate into a real wage increase of 0.5%—too low to boost domestic demand significantly.”

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