CH: Gross Domestic Product

Fri May 29 00:45:00 CDT 2015

Consensus Actual Previous Revised
GDP Q/Q (SA) 0.0 -0.2 0.6 0.5
GDP Y/Y (NSA) 1.6 1.1 1.9

The Swiss economy slowed sharply at the start of the year. Following a downwardly revised 0.5 percent quarterly increase in the October-December period, total output shrank 0.2 percent, its first contraction since the third quarter of 2011.

Today's announcement should come as little surprise to the SNB which in its April Monetary Policy Assessment warned of a possible marked weakening in the economy during the first half of the year. Nonetheless, it underlines the substantial negative impact of the sharp appreciation by the CHF triggered by the central bank's abandonment of its minimum exchange rate policy in January. More recent figures have hinted at some stabilisation in economic activity this quarter, but there is a clear risk of Switzerland falling back into recession.

Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy. The first estimate includes the main GDP expenditure components as well as a breakdown of total output in terms of the major production and service sectors.

GDP is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.

The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.