The figures published in early September by the State Secretariat for Economic Affairs (SECO) indicated that the Swiss economy grew by 0.7 percent in the second quarter, which was above the long-term trend. While the strong growth is encouraging, it was driven almost exclusively by an increase in exports in the chemical and pharmaceutical sectors. Elsewhere, economic performance was subdued. Without the impetus provided by foreign trade, the Swiss economy would have stagnated again in the second quarter. This pattern looks set to continue at the start of the third quarter. Another notable rise in exports was observed recently, while there’s still no sign of recovery in consumption and investment activity.

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The leading US economic indicators continue to point to a significant slowdown. US industrial and construction companies, in particular, expect a decline in business activity over the coming months due to weak order intake. While service providers still expect to achieve moderate growth at the moment, the significant weakening of the labour market could put household consumer spending under pressure. This is mainly because the current level of consumption is not only being supported by rising disposable income, but also by a declining savings rate and a rise in defaults on credit card bills. In view of this subdued economic outlook, the US Federal Reserve is expected to ease its monetary policy this year, despite core inflation standing at over 3 percent.

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The eurozone’s economy continues to post weak performance. Industrial production is still falling sharply, while Europe’s population is struggling to maintain its current level of consumer spending. However, sentiment in the services sector improved considerably in August. This upturn was mainly driven by French service providers, which had benefited from the Olympic Games being held in Paris, casting doubt over the stability of this improvement. Against this backdrop, the European Central Bank (ECB) faces growing pressure to ease monetary policy again after its first two interest rate cuts in June and September. However, it’s currently being held back by stubborn inflation in the services sector, which remains at over 4 percent.

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Growth momentum in the emerging markets has faltered slightly of late. This is mainly due to the economic weakness in China, the biggest emerging market economy. There was no sign of any substantial recovery in August either. The continued, relentless erosion of real estate prices – the main form of saving for China’s middle class – is particularly worrying. Core inflation also dropped again recently and now stands at just 0.4 percent, which is remarkably low for an economy that usually achieves strong growth. The pace of growth in other emerging markets, such as India, Thailand, the Philippines and Chile, has also slowed slightly of late. However, growth performance overall is in line with the long-term trend of these countries.

Growth, sentiment and trend

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