Consumer sentiment improved slightly in July but was still well short of its long-run average. At minus 27, SECO's climate indicator was up 3 points versus May to record its highest reading since January 2022. However, with a historic norm of minus 6, the latest level still suggests that households remain very cautious.

The modest overall gain reflected a less pessimistic assessment of the past economic situation (minus 35 after minus 51) and a more optimistic view of the future (minus 7 after minus 18). Indeed, the latter measure moved back above its long-run average (minus 9) for the first time since the start of last year. Job security (minus 2 after minus 24) also improved as did the past financial situation (minus 38 after minus 41) but the expected financial situation (minus 25 after minus 23) was a little softer. Of note too, expected inflation (79 after 84) declined to its weakest mark since October 2021 although it was still above its long-run mean (67).

Overall, the latest results suggest that while the household sector continues to adjust to historically high inflation, confidence is gradually returning courtesy of the ongoing buoyancy of the labour market. The SNB will be pleased with the fall in inflation expectations but current readings are still likely to be seen as too high.

The State Secretariat for Economic Affairs (SECO) compiles a quarterly survey of consumer attitudes on present and expected economic and financial conditions. The survey covers around 1,200 Swiss households and results are synthesised into a single summary consumer climate index that attempts to measure consumer sentiment.

The pattern in consumer attitudes and spending is often a major influence on stock and bond markets. For stocks, strong economic growth translates to healthy corporate profits and higher stock prices. For bonds, the focus is whether economic growth goes overboard and leads to inflation. Ideally, the economy walks that fine line between strong growth and excessive (inflationary) growth. Consumer spending accounts for a major portion of the Swiss economy, so investors want to know what consumers are up to and how they might behave in the near future. The more confident consumers are about the economy and their own personal finances, the more likely they are to spend. An increasing important element of the survey is the question concerning current buying intentions.