Economic Environment and Outlook

Basel, Q3-2019 (July 2019)


Despite challenges confronted by the Swiss economy, growth is resilient and the outlook reasonably positive, with a projected increase of 2%. The Swiss franc remains a concern, although recent stability should bring some relief to the corporate sector. Lower costs related to oil and other commodities also support companies. Domestic consumption should be fairly stable with unemployment low. With low inflation expected through 2019, the SNB will maintain its accommodating monetary policy. But decreasing growth in Europe could have a negative impact.


The US economy will probably stagnate in the third quarter of 2019. Consumption remains positive, labour market conditions remain strong, and the savings rate is still improving. House prices are stable and residen-tial investment should remain buoyant. Short-term rates could go lower in 2019, growth forecasts are now more cautious. The problems of the financial sector are not over, but bank losses are decreasing. The corpo-rate sector remains fairly competitive, earnings are expected to remain robust. Weaker European growth will be a growing concern for export-oriented companies. There are more positive than negative elements to this scenario but on the other hand the administration's ideas on various domestic issues and the Middle- and Far East have the potential to negatively impact growth and markets. In spite of some success in negotiations between the United States and China, the impact of the ongoing trade war should not be underestimated.


Industrial production is somewhat subdued. GDP growth rates are not improving, some countries are still challenged by public debt financing. The ECB is reassessing its monetary policy. Weaker economic growth on the Continent will allow central banks to keep interest rates at low levels - markets are now expecting a more generous monetary policy. Manufacturing is firm, inflation remains low. In the UK, the Bank of Eng-land might need to contemplate a new monetary strategy for post-Brexit Britain, as negotiators remain en-gaged in a complex negotiation process that will stretch into 2019: a new Prime-Minister will be under great pressure to avoid a no-deal Brexit.


The government in Japan is pushing for more growth and the central bank, with its negative interest rate policy, has pledged to expand asset purchases, buying bonds and treasury bills. The public debt is already very high. The economy is stalling, private consumption and public investment weaker. A more competitive yen eases corporate pessimism. In China, exports are less vigorous than expected. The economy and domes-tic demand remain stable. In India, the new government continues to implement policy changes designed to improve growth.


CHFStable, due to its role as a safe haven currency and the relative good performance of the Swiss economy. The SNB will continue to sell Swiss francs to avoid a further appreciation.
USDCould weaken.
JPYTo remain stable, likely to soften again if there is more central bank intervention.
GoldWill recover due to continuing economic and geo-political uncertainties.

Financial Markets

  Switzerland Europe UK USA Japan
Interest Rateslowlowstablestablelow
Stock Marketsvolatilevolatilevolatilevolatilevolatile


The aforementioned Economic Environment and Outlook shall not constitute a recommendation or an investment advice. It is not the result of any financial analysis and the “Directives on the Independence of Financial Research” issued by Swiss Bankers Association does therefore not apply.