Swiss GDP: Weaker outlook for Swiss economy

Subdued economic prospects after a strong start to the year

In the first quarter of 2019, the Swiss economy was doing amazingly well. But the outlook is not so cheery. Nevertheless, Swiss GDP is expected to rise by 1.5 percent this year. This is primarily due to one sector.

Good start to the year for the Swiss economy

In the first quarter of 2019, the Swiss economy grew by 0.6 percent compared to the preceding quarter. This trend is owed to private consumption in particular. But construction spending increased as well, thanks to the attractive interest rate environment and mild weather.

In addition, investments in machinery and equipment provided a positive surprise. Even the export economy showed growth – mostly for exports in the pharmaceutical industry. Overall, Switzerland's gross domestic product (GDP) is already up by 1.7 percent in a year-on-year comparison.

Swiss economy benefits from dynamic pharmaceutical exports

Swiss economy benefits from dynamic pharmaceutical exports

Export growth year-on-year, 3-month moving average

Source: Swiss Federal Customs Administration, Credit Suisse

Economic growth in Switzerland slows down

On the other hand, the prospects are subdued. In particular, the export economy is facing tougher times. This is suggested by the Purchasing Managers' Index (PMI). Since April, this index stands below the growth threshold for Swiss industry. Economic conditions in key destination countries for Swiss exports have become decidedly gloomier and are at the weakest level since 2013. Accordingly, the growth in Swiss exports is likely to slow down.

In contrast, the PMI in the service sector remains well above the growth threshold. This sector focuses more on Swiss consumers, who remain ready to spend money thanks to the favorable employment situation. Private consumption is also boosted by slightly increased immigration.

Economic growth only for Swiss service sector

Economic growth only for Swiss service sector

PMI Index > 50 = Growth

Source:, Credit Suisse

Swiss GDP rises by 1.5 percent in 2019

Ultimately, however, the strong consumption will not be able to offset weaker exports, especially as a weaker export demand usually curbs investments. For this reason, we also do not expect additional stimulus for the Swiss economy from capital spending on machinery and equipment. At the same time, a rising level of vacancies for rental apartments slows down growth in construction investments.

The economists at Credit Suisse therefore expect that economic growth in Switzerland will slow down in the course of the year. As indicated already in the spring forecast, they expect a real GDP of 1.5 percent in 2019.