Economic Outlook

Global economy

These are stormy times on the international scene. Established trade relations are being shaken by the ongoing tariff conflict, and the eurozone economy is feeling the impact. Tariff threats and political upsets are putting a damper on business activity. It should not be assumed, however, that the eurozone is headed for recession. What we are likely to see is a phase of slower growth.

USA

The US economy performed vigorously in the second quarter, growing at an annualised rate of 4.1% compared with Q1. The main drivers of expansion were exports, personal consumption and business investment. The signs are that GDP will continue to grow strongly in the second half of this year, though the Q2 result is unlikely to be topped; the jump in exports was an exceptional development attributable to Donald Trump’s new tariffs. The Fed will stick to its present course and gradually push up interest rates.

Eurozone

Eurozone GDP growth in the second quarter was a mere 0.3%. Weak new orders and retreating leading indicators had pointed in advance to feeble growth. We expect the overall rate of expansion to gain momentum in the second half year. The ECB has set out its timetable and will in all likelihood terminate its monthly asset purchases at the end of this year. But an early interest rate hike is not on the cards. Frankfurt has ruled out such a move until after the summer of next year at the earliest.

Germany

Germany’s economic performance this year has been disappointing. Sentiment indicators are weakening, and so are the hard data. New orders in the manufacturing sector have been relatively feeble so far. We will have to await further results to see whether the German economy can live up to our optimistic forecast.

Switzerland

Important economic leading indicators continue to show robust economic development for the current year. However, neighboring eurozone countries appear less dynamic than expected in the current year. Whether the Swiss economy can meet the optimistic GDP forecast for the year 2018 of the economists interviewed by the news agency Bloomberg remains questionable.

Emerging markets

It looks as if the Chinese government has braked rather too strongly. The aim was to slow the rate of credit expansion. This has been achieved, but it has fuelled anxieties about the macroeconomic situation. The focus is now shifting back to economic growth. China’s State Council has passed a package of measures embracing a more pro-active fiscal policy, an accommodative monetary policy, significant stimulus for domestic demand and support for the financing of small and medium-size enterprises and local authorities. The aim is also to head off the possible negative economic impact of an escalating trade conflict with the US.