CH: Gross Domestic Product

Tue Dec 01 00:45:00 CST 2015

Consensus Actual Previous Revised
GDP Q/Q (SA) 0.2 0.0 0.2
GDP Y/Y (NSA) 0.9 0.8 1.2 0.9

The economy unexpectedly stalled in the July-September period. No change in real GDP on the quarter followed an unrevised 0.2 percent rise in April-June to reduce annual growth from a weaker adjusted 0.9 percent to just 0.8 percent.

However, the disappointingly soft third quarter performance masked a 0.4 percent quarterly gain in household spending and reflected instead a slowdown in equipment and software investment (0.2 percent after 1.5 percent) and further weakness in construction investment (minus 0.9 percent after minus 0.3 percent). Government consumption climbed a hefty 1.8 percent but destocking again hit headline growth.

Net trade was mixed with the balance on goods (exports excluding valuables were up a solid 1.1 percent) making a positive contribution but services (exports down 0.3 percent, imports up 0.6 percent) subtracting from the change in total output. The exchange rate is clearly an issue but, by and large, Swiss exporters have held up quite well.

Meantime, deflationary pressures showed no sign of abating and whole economy inflation was steady at a minus 1.2 percent annual rate.

The headline third quarter data probably slightly overstate the weakness of the Swiss economy. Households were still spending last quarter and a fourth successive contraction in inventories should leave producers well placed to respond to any upturn in demand. Nonetheless, declining investment hardy signals much confidence in the business outlook and prices are still falling. Against this backdrop the SNB will probably feel obliged to respond to a widely expected announcement from the ECB about additional monetary accommodation on Thursday.

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.