Switzerland’s economic outlook has improved

Switzerland's economic outlook has improved, with businesses showing a stronger capacity to weather the negative impact of the stronger Swiss franc. The Swiss economy avoided recession during the second quarter, as it unexpectedly registered a 0.2% q/q advance off a 0.2% contraction in Q1 on the back of gains in consumption, government spending, and investment. 

Leading economic indicators also suggest that Swiss real GDP growth will accelerate in the second half of 2015, with the Swiss Economic Institute (KOF) Economic Barometer edging up further in August. Meanwhile, the country's ZEW economic sentiment index rebounded sharply and the manufacturing PMI rose above the 50-point level (to 52.2, up from 48.7 in July) signalling growth in factory output for the first time since the Swiss National Bank's (SNB) decision to abandon its currency ceiling against the euro in January.

"We expect Swiss real GDP growth of 0.7% in 2015 and 1.2% in 2016. Nevertheless, deflationary pressures persist, with the headline inflation print declining further to -1.3% y/y in July. Swiss inflation is forecast to ease from 0% in 2014 to -1.5% in 2015 and -0.2% in 2016", notes Scotiabank.