Swiss Economic Growth Slows Amid Weak Manufacturing and Global Pressures

Slow GDP Growth in Q3 2024 with Challenges in Key Sectors
Switzerland’s GDP growth in Q3 2024 was modest at 0.4%, a slowdown from the previous quarter’s 0.6%. When adjusted for seasonal factors like sporting events, growth dropped further to just 0.2%. This reflects a larger trend of muted economic performance, driven by a weak manufacturing sector despite solid trade and consumption figures. While trade showed some recovery, and private consumption remained robust, industrial and export sectors faced significant challenges.

Key Drivers of Economic Growth: Trade and Consumption
Trade and Consumption Show Strength, But Industrial Investment Declines
Trade played a critical role in bolstering Switzerland’s economic growth, rising by 1.4% following a period of weak performance in earlier quarters. Similarly, private consumption grew by 0.5%, indicating solid domestic demand. Government spending and construction investments also contributed positively to GDP growth. However, the industrial sector, particularly investments in equipment like machinery, vehicles, and IT, showed weakness, declining by 1.3%. Imports also dropped slightly by 0.4%, reflecting a broader slowdown in economic activity.

Manufacturing and Industrial Sector Struggles Amid Global Headwinds
Manufacturing Decline Weighs on Overall Economic Health
The industrial sector, particularly manufacturing, posted disappointing results with a 1.1% decline in the third quarter. The chemical and pharmaceutical industries, which have typically been key drivers of Switzerland’s industrial performance, saw growth of just 0.2%, down from previous periods of stronger expansion. This decline reflects broader economic struggles within the sector, affected by both domestic and global pressures.

External Economic Pressures and Weakening Exports
Geopolitical Tensions and Recession in Germany Impact Swiss Economy
Experts cite geopolitical tensions and the economic downturn in neighboring countries, especially Germany, as key external pressures weighing on Swiss exports. A drop in Swiss exports, particularly in the automotive sector, has been linked to a European-wide crisis that has severely impacted demand for automotive components, a sector where Switzerland plays a significant role. As Sergio Rossi, professor of macroeconomics at the University of Fribourg, explained, many Swiss firms that supply components to European car manufacturers are struggling due to the ongoing challenges in the automotive industry.

Investment and Public Spending Cuts: A Concerning Outlook
Weak Investment and Government Spending Cuts Raise Risks for Growth
Despite resilience in domestic consumption, Switzerland faces a worrying outlook regarding investment. Reduced public spending, as the Swiss government looks to address rising deficits, is expected to further dampen the economy. Investment remains low, contributing to a potentially weak economic recovery in the coming quarters. Low levels of investment and weak export performance pose significant risks for Switzerland’s long-term economic growth.