Swiss GDP grew a weak 0.3% QoQ in Q2, as strong imports weighed on growth.
Real GDP growth in Switzerland in Q2 2017 of just 0.3% QoQ clearly missed our and consensus expectations (both at 0.5% QoQ), but this was much more related to a substantial revision of past GDP data rather than any slowdown of the Swiss economy. The details of the Q2 GDP release show that net exports contributed negatively to growth in Q2 2017, mainly due to strong imports of pharmaceutical products. Private consumption growth was soft. Meanwhile, investment spending was supported by a solid increase in construction investment. More generally, Swiss economic growth is reaccelerating after a marked but short-lived slowdown at the end of 2016. Most indicators available suggest that economic growth has accelerated in Q3 2017. However, due to the GDP revision, our 2017 growth forecast of 1.5% YoY does not appear to be achievable anymore, and we will need to revise it lower.
Other data highlights
AUSTRALIA, MONETARY POLICY: The Reserve Bank of Australia’s (RBA) policy meeting yesterday was uneventful, as expected. The RBA kept the policy rate at 1.5% and maintained a neutral bias. The economic assessment was slightly more upbeat, but the RBA kept a relatively cautious tone on the inflation outlook. Most importantly, it reiterated the potential negative impacts of the stronger AUD on the growth and inflation outlook. Going forward, we expect inflation to remain stuck in the RBA’s comfort zone and growth to recover to a still below-potential pace. Hence, we see the RBA on hold over the next 12 months.
Bank of Canada policy rate decision (%): Consensus: 0.75; Prior: 0.75
After having increased the policy rate at its last meeting, we expect the Bank of Canada (BoC) to stay on hold at today’s meeting before hiking rates again in October, when new forecasts will become available. There remains, however, a risk that the BoC could already decide to lift policy rates today amid continuously strong economic growth.
Brazilian Central Bank policy rate (%): Consensus: 8.25; Prior: 9.25
As inflationary pressures in Brazil continue to remain low, we expect the Brazilian Central Bank to continue with its easing cycle.