Industry put a brake on Swiss economic activity which saw its growth slow to 0.2% in the third quarter of 2024, compared to 0.5% in the previous quarter, according to a first estimate on Friday from the State Secretariat to the economy (Seco). This figure is at the bottom of the forecast range of economists surveyed by the Swiss agency AWP which ranged between 0.2% and 0.4% for the third quarter.
“Growth in the services sector was offset by negative developments in industry”Seco said in a press release. It is due to release more detailed statistics on November 29. Switzerland’s gross domestic product (GDP) grew by 0.3% in the first quarter, then accelerated to 0.5% in the second quarter thanks to pharmaceutical products, its leading export sector, which had offset demand that was already declining in the industry.
“Economic growth was surprisingly slow in the third quarter”reacted Adrian Prettejohn, economist at Capital Economics, in a market commentary. This slowdown should encourage the Swiss central bank to further ease its monetary policy, according to him. The Swiss National Bank (SNB) was ahead of the European Central Bank and the American Federal Reserve in lowering its key interest rate in March. It reduced it by 0.25 points, then made two reductions of the same magnitude in June and September.
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Appreciation of the Swiss franc
“The strength of the Swiss franc and weak growth in the euro zone will weigh on exports”warns Mr Prettejohn. “But we do not think that this will prevent the economy from returning to the growth trend during the coming quarters, at around 0.5%” he judges, the Swiss economy can also count on consumption thanks to wage increases and low inflation. In mid-September, the Ministry of the Economy maintained its growth forecast (excluding sporting events) for 2024 at 1.2%, saying it expected global demand to be lower than its historical average given a sluggish economic situation in the euro zone, an important outlet for Swiss exports. Last year, Switzerland sold more than 46% of its exports there.
Employer organizations have called on the SNB to act to combat the strength of the Swiss franc, starting in August with Swissmem, which represents industrial companies, followed in September by two organizations from the watchmaking sector. The strong appreciation of the Swiss franc against the euro adds additional difficulty to companies, already faced with a drop in orders from China and Germany in industry and a fall in consumption in China in watchmaking, these employers’ organizations had warned.
According to a first estimate from the European institute Eurostat, GDP in the euro zone increased by 0.4% in the third quarter thanks to better than expected growth in activity in Germany, which escaped a recession. According to a first estimate from the Destatis institute, Germany’s GDP increased by 0.2% in the third quarter.
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