The cracks that are now appearing in personal consumption and new manufacturing orders do not yet amount to a sizeable setback. Nevertheless, GDP growth for the first quarter will be relatively weak due to the federal government shutdown at the start of this year. But prospects for the coming quarters are encouraging despite the inverted yield curve. In the past an inverted yield curve was a reliable indicator of an imminent recession.
Faltering world trade is hurting the eurozone‘s export-dependent sectors. But stable consumer spending and firm construction activity are heading off a more serious economic downturn. The outlook now depends on a rapid positive effect from the Chinese government‘s stimulus measures. If that happens, the eurozone could find itself in a better economic situation again. Otherwise, there would be a real danger of recession.
The German economy is in a worrying condition. Exports are being hit by sluggish world trade. There is still hope, however, that the stimulus measures launched by the Chinese government will give a lift to German industry in the months ahead. Meanwhile, consumer spending and the buoyant construction sector will have to help the eurozone’s biggest economy through its current difficulties.
The international environment in which the Swiss economy operates has deteriorated in recent months. The eurozone is likely to experience relatively weak economic momentum during the first half of this year. The Chinese government’s stimulus measures will take time to bear fruit. The outlook for the US economy, meanwhile, remains solid. Swiss merchandise exports will be weak in the first half of 2019, with a pick-up unlikely until the second half of the year. At the same time the cooling of the global economy is weighing on foreign tourist demand. Construction investment is expected to stagnate. Real-term residential building looks set to decline following a period of overproduction that has led to rising vacancy rates.
Initial mild signs of an improvement in the Chinese economy are now visible. Chinese purchasing manager’s indices have recently turned up. Tax cuts and the reduction of employers’ social insurance contributions are giving a boost to investment. This seems to confirm our 2019 forecast of a recovery in the second half of the year. That would have positive knock-on effects on other emerging economies.