Swiss economic growth falls sequentially in Q3 2018, domestic and foreign trade negatively impact growth

Swiss economic growth fell in the third quarter on a sequential basis, owing to the industrial and service sectors. Meanwhile, domestic and foreign trade had a negative impact on the expenditure side.

The Swiss Federal Statistics Office showed that the economic growth fell 0.2 percent after growing 0.7 percent in the prior quarter. The solid, continuous growth phase enjoyed by the Swiss economy for one and a half years was suddenly interrupted. Switzerland is thus following the considerable economic downturn seen at the same time in other European nations, especially Germany.

Both the industrial and service sectors contributed negatively to the quarterly growth result. Value added in manufacturing dropped slightly by 0.6 percent; however, in the context of the particularly dynamic growth of the past few quarters, this amounts to a normalization at a high level. Within the energy sector, value added decreased after two extremely positive previous quarters, with the dry summer resulting in production downtime at hydropower plants. Consistent with the decline in production in these sectors, exports of industrial goods and energy dropped sharply. Total exports of goods also contracted substantially. October’s trade figures are already hinting at a quick recovery.

The quarterly result for the service sector was hardly better. Value added in trade fell considerably after an already negative previous quarter, driven down by both retail and wholesale. The financial sector also saw a minor drop, with the stable growth lasting for several quarters, being interrupted. Both value added and exports of financial services dropped.

On the contrary, the positive development of the earlier quarters persisted in the business services and health sectors. The sluggish growth in services reflects the generally weakened foreign demand for Swiss services. Meanwhile, the soft domestic economy in the course of the subdued consumption climate in Switzerland also impacted in the third quarter.

Private households barely increased their consumption expenditures in the third quarter, indicating little willingness to make major purchases in light of soft real wage development. General government consumption decreased a bit, while investment in construction almost flatlined. Investment in equipment dropped sharply in nearly all categories. Imports of goods and services also dropped significantly.

At 14:00 GMT the FxWirePro's Hourly Strength Index of Swiss franc was neutral at -48.4753, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at 48.6738. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex