Economy: The global economy hangs in the balance 

Economic performance remained weak in the first few months of the new year. In addition to the challenges facing the export industry, which is recording significantly lower sales volumes than in 2024 and early 2025, weaker domestic demand is increasingly weighing on the Swiss economy. Retail sales stagnated in the first two months, highlighting consumer caution. However, there is still some cause for hope in the fact that Switzerland is one of the few economies where sentiment among both service and industrial companies has improved recently. Furthermore, due to its lower energy dependency, Switzerland is less severely affected by higher energy prices than other countries, including its European neighbours. The inflation rate also rose in March, but only from 0.1 to 0.3 percent.

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The US economy experienced a significant slowdown in growth towards the end of last year, which continued into the start of the new year. According to the Federal Reserve Bank of Atlanta’s real-time estimate, the world’s largest economy grew by just 0.3 percent in the first quarter of 2026, remaining well below its long-term average. The labour market remains weak for the time being, although further job cuts such as those seen towards the end of 2025 have so far been avoided. The Iran war is creating additional headwinds, further dampening consumer confidence − which was already at a low level − and making service companies more cautious. Higher energy prices are also pushing the inflation rate up again.

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Signals from the eurozone were encouraging at the start of the year. Business sentiment improved, and the German government’s massive fiscal package promised to begin delivering results for the country’s economy, the largest in the currency area. However, the Iran war showed the first signs of slowing down this recovery. Business confidence has already faded slightly, and consumers have also become more cautious. To make matters worse, the eurozone’s inflation rate rose from 1.9 to 2.5 percent in March, owing to higher energy prices. This is a very uncomfortable situation for the European Central Bank (ECB), as it cannot influence global energy prices; interest rate hikes would therefore jeopardize the fragile economic recovery without eliminating the cause of inflation.

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Emerging markets in Asia are particularly affected by the Iran conflict, as they source a large proportion of their raw materials from the Gulf states and, in addition to higher prices, are facing supply issues. The opening of the Strait of Hormuz is likely to have averted the worst bottlenecks for the time being, but economic development is expected to slow. This is all the more significant given that economies such as India and Indonesia have grown strongly in recent years, providing significant support to the global economy. Meanwhile, the conflict comes at a particularly inopportune time for China, which is already grappling with an economic slowdown and hoping for a recovery that now threatens to be further delayed.

Growth, sentiment and trend

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