Economy: Global economy remains stable despite headwinds

The Swiss economic recovery gained significant momentum in the second quarter. According to the State Secretariat for Economic Affairs (SECO), gross domestic product grew by 1.9 percent – its fastest rate since 2021. The pharma industry made the largest contribution to growth, but numerous other sectors also posted gains. The latest company surveys also indicate that the economy remains on course for growth in the third quarter. At the same time, inflation rose from 0.4 to 0.8 percent. Alongside higher fuel and heating oil prices, the weaker Swiss franc is also contributing to this, making imports more expensive. However, as domestic price pressure remains low, there is little need for action on the part of the Swiss National Bank (SNB) for the time being.

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The US economy continues to grow much more slowly than in previous years. The economy is mainly being held back by weak consumption, as high inflation is weighing on household purchasing power. The construction industry is also being hit by high interest rates. By contrast, high levels of business investment, supported in particular by the expansion of artificial intelligence infrastructure, is preventing a more pronounced downturn. This resilience is also reflected in the labour market, which recently became more robust again. At the same time, it stands in the way of sustained weakening of inflation, which remains far too high at 3.4 percent. The US Federal Reserve (Fed) has therefore decided to raise interest rates.

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The eurozone’s recovery remains on track. The business climate has continually improved in recent months, and companies are much more optimistic than they were in spring. The recovery is also being supported by foreign trade, whose export volumes increased again recently. Consumer spending remains a drag, however, having lost some momentum again due to higher fuel prices. Higher energy prices have also pushed inflation up to 3.2 percent, but the upsurge in prices hasn’t yet spread broadly to other goods and services. However, in its September assessment, the European Central Bank (ECB) decided to raise the policy rate.

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Economic performance in the major emerging markets remains uneven. The Asian economies are remarkably robust, despite being particularly affected by the economic fallout from the Iran war. Taiwan and South Korea are benefiting from strong demand for semiconductors and artificial intelligence. With economic growth of almost 8 percent, India also remains an important growth engine in the global economy. The trend is less encouraging in Brazil, where high interest rates are increasingly holding back consumption and growth. Economic data from China also remains disappointing. Domestic demand remains weak, there’s no sign of an economic recovery and the country is still in recession.

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