Swiss Q2 GDP beats expectations, but outlook could darken in coming months

According to data released today by the Swiss State Secretariat for Economic Affairs (SECO), Switzerland’s 2Q 2016 Gross Domestic Product (GDP) grew by 0.6 percent quarter-on-quarter, beating forecasts for a 0.4 percent rise. GDP expanded 2 percent year-on-year, more than twice as much as the market had expected. The rise compared to a revised 0.3 percent quarter-on-quarter and 1.1 percent year-on-year print in Q1.

SECO said that the figures were underpinned by foreign trade as well as government consumption. However, the main domestic components continued to show signs of weaknesses with private consumption stagnating in Q2 and investments contracting.

Swiss economy is not immune to the neighboring Eurozone slowdown. Brexit has added uncertainty to the current outlook. As risks from the Brexit vote start to emerge and consumer confidence still at very low levels, domestic demand weakness is set to continue.

“Domestic demand failed to contribute positively to growth. It is rather what made import growth so weak which allowed for a net export lead rebound. With the risks from the Brexit vote only starting to emerge and consumer confidence still at very low levels, this was likely the last strong quarter of 2016," said Julien Manceaux, Senior Economist at ING

The Swiss National Bank will hold its rate decision next week, September 15th. With a very low domestic demand growth expected, monetary policy will remain a key determinant of growth in 2016. Supporting exports growth will be key to limit the damages in terms of GDP and employment.

"We expect the SNB to continue to intervene to support the CHF above parity against the euro in 2016 and to ensure that interest rate spreads between the euro and CHF remain substantial," ING said in a report.