Economy: Asia and Europe facing economic headwind

The Swiss economy is being hit hard by the difficult global economic climate, which it is particularly exposed to  given its strong dependence on exports. However, foreign trade rose slightly again in the first quarter of 2026 , which is also reflected in a slight improvement in business sentiment, following a sharp decline in the second half of 2025. Nevertheless, the level of exports remains well below average and the domestic economy continues to falter. Retail sales are expanding at a slower pace, and consumer confidence remains downbeat. All the same, the fact  that Switzerland is one of the few currency areas to have sustainably restored price stability in recent years is proving beneficial. As a result, inflation remains comfortably within the Swiss National Bank’s (SNB) target range of 0.6 percent , despite higher energy prices.

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After a weak year -end in 2025, the US economy returned to moderate growth in the first quarter of 2026. This period was mainly characterized by counter-effects from the government shutdown and huge investments in artificial intelligence infrastructure. Business sentiment indicates that this slight improvement carried over into the start of the second quarter. That said, delivery delays and price increases are statistically recorded as an increase in activity in the usual company surveys, which distorts the figures somewhat. The economic situation remains fragile overall, reflected not least in the fact that sentiment among US consumers is at its lowest level ever. To make matters worse, inflation rose to 3.8 percent in April, while wage growth rates continue to decline.

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In the eurozone, the dampening effects of the Iran war are already being felt. Economic growth ground to a halt in the first quarter, and both consumers and service providers have become noticeably more pessimistic. Only industrial companies are maintaining their solid sentiment ratings. However, this is  likely  to be at least partly due to pull-forward effects, as many companies have anticipated orders and production in order to forestall impending price increases for energy and intermediate goods. At the same time, inflation rose to 3.0 percent. That said, in light of the weak economy, the risk of higher energy prices becoming permanently entrenched in the global economy through broad-based price pass-through appears limited, which will keep the urgency of interest rate hikes low for the time being.

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The major emerging economies in Asia, such as India and Indonesia, which have played a key role in supporting global growth in recent years, are particularly exposed to the consequences of the Iran war due to their close economic ties with the Middle East. Sentiment figures in these countries have suffered significantly as a result, and a slowdown in growth is emerging. The headwinds also come at an inopportune time for China, which has long been mired in a deep-seated real estate crisis and a downturn in economic performance. The 5 percent economic growth recently reported by officials looks difficult to replicate on the basis of more reliable economic data, and is likely to be politically motivated.

Growth, sentiment and trend

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