Swiss economy stagnates during the second quarter

Disappointing data puts pressure on the Swiss Franc

By Ahmed Azzam | @3zzamous | 4 September 2023

Market open
  • Global markets are relatively calm due to a bank holiday in the United States

  • Oil prices are stabilizing near the $84-per-barrel level

  • There are increasing expectations for OPEC+ to continue reducing production following statements made by Novak

Swiss economy stagnates during the second quarter

The most recent data released this morning reveals that the Swiss economy is facing a recession in the second quarter of 2023. The slowdown in the global economy has negatively impacted the manufacturing sector and commodity exports, thereby affecting Switzerland's overall economic growth.

During the second quarter of the year, Switzerland's gross domestic product showed zero percent growth, following a 0.9 % increase in the first quarter. Initial projections had indicated a modest growth of 0.1%, but these expectations fell short.

The primary cause of this economic slowdown can be attributed to a decline in manufacturing, with a contraction of 2.9 % in production. The chemical and pharmaceutical industries in the country have also experienced declines. Furthermore, businesses have become more cautious, leading to a 3.7 percent decrease in equipment investment compared to the previous quarter. This decline in investment is particularly evident in information technology, research and development, and vehicle expenditures.

Given the significant reliance of the Swiss economy on the global economy, it is expected to face challenges throughout the current year. The anticipated global economic slowdown in the coming period has added to these concerns. The continuous interest rate hikes implemented by central banks have had adverse effects on the global manufacturing sector and overall business activities.

Oil stabilizes in the first trading session

In terms of oil prices, they have stabilized during the initial trading sessions of the week. This stability can be attributed to the growing expectations that OPEC will persist with its policy of reducing production to support price levels.

Futures contracts for Brent crude, slated for delivery in November, have dropped to $88.52 per barrel. Conversely, WTI contracts intended for delivery in October have remained steady at $85.55 per barrel. Both contracts concluded the previous week at their highest levels in over six months, following two consecutive weeks of losses.

However, despite market expectations for OPEC+ to continue their supply reduction policy, the recent increase in U.S. oil inventories has limited the gains, resulting in price stabilization at the beginning of this week.

These expectations have emerged following the statements made by Russian Prime Minister “Alexander Novak” on Thursday. His remarks included an agreement between Russia and the organization regarding the continuation of production cuts. These developments come amidst ongoing concerns about a decline in global demand, which have been intensified by disappointing data from China.