Despite the tense situation on the international stage, the latest batch of economic data from Switzerland surprised to the upside. However, the Swiss franc failed to catch any bid as it traded sideways against the greenback around 1.0040. Even the victory of nationalist at the European elections did allow the Swissy to gain ground against the single currency as EUR/CHF remained above the 1.12 threshold.
The Swiss GDP rose by 0.6% in the March quarter, beating widely economists’ estimates of 0.3%q/q. Over the last 12 month, the economy grew 1.7%, also topping median forecast of 1% and upwardly revised figures of 1.5% previously. The acceleration of household consumption together with a pick-up in investments explain mostly this good reading. Household consumption increased by 0.4%q/q, compared to 0.3% in the previous one, while investment in capital goods surged by 1.5%q/q versus a contraction of 0.1% in the December quarter.
Despite mediocre trade data for the month of April – exports contracted by 0.6%m/m while imports rose by 1.5% - figures remained good for the first quarter as exports of goods rose 2.2%q/q (+5.8% previously), while service exports hit 1.7%q/q (+0.6% in 4Q 2018). Overall, the report showed that the Swiss did quite well, especially against the backdrop of escalating trade tensions between the US and China.
Nevertheless, we believe that 2019 will be a challenging year for the Swiss economy. The latest European elections showed that the cohesion between countries continues to fall apart, which does not bode well for business. Being an outward-looking nation - i.e. highly dependent on international flow, especially with the Union – Switzerland could only suffer from this situation. Consequently, we wouldn’t be surprise to see renewed interest for safe-haven currencies such as the Swiss franc and the Japanese yen as the geopolitical uncertainty continues to rise.
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