Swiss economy starts year with unexpectedly strong growth

THE Swiss economy picked up momentum in the beginning of the year after a stagnant finish of 2022, while industry outlook and factory orders point to more difficult times ahead.

Gross domestic product grew by 0.5 per cent in the first quarter, according to government data published on Tuesday (May 30). That exceeds every single economist estimate in a Bloomberg survey, which had a median forecast of 0.1 per cent. The main driver of the recovery were domestic consumption, which made up for flat government demand.

It’s a strong return to growth for Switzerland, which dodged a recession during the energy and inflation crises but was hit by falling exports at the end of last year. While economists currently predict an expansion of 0.6 per cent in 2023, the purchasing managers’ index has been below the growth threshold since January amid subdued industry sentiment.

“The outlook for the coming months does not inspire a great deal of optimism,” Swiss technology industry association Swissmem said this month.

While companies currently draw on strong order intake from last year, a decline in new bookings and low demand in key markets point to a “clear slowdown,” according to the association. Interest-rate increases and global tensions between the US and China pose further risks for growth.

This is echoed by Swiss speciality chemicals maker Clariant, which concluded in its quarterly statement that “uncertainties and risks related to the economic environment remain.”

The KOF Economic Barometer, published separately on Tuesday, declined a second consecutive month in May, showing that the “outlook for the Swiss economy for the middle of 2023 is thus deteriorating further and remains at a below-average level.”

The fact that Switzerland’s Emmentaler cheese was denied trademark protection in the EU last week – because the term was too generic and not associated with its home country any more – might just add to the woes of managers between Zurich and Geneva. BLOOMBERG