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GDP forecast based on semantic business cycle identification

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Release 2019-11-15
 
    Figure 1: Business cycle indicator and Swiss GDP with forecast  
   

forecast

 
       
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Forecast update. The «KOF Surprise Indicator» again tests recession territory at -0.05 (2019 Q2: -0.03) after its brief recovery in summer. This latest reading indicates that annual growth remains weak at about 1.2 percent year-on-year expansion in the third quarter of 2019.
 
       
«home   Table: Swiss real gross domestic product with forecast  

 
Date
Year-to-year growth (%) of Swiss real gross domestic product (GDP)
 
fitted / forecast
standard error
seco estimates*
2019(1)
1.00
-
1.68
1.00
2019(2)
0.64
-
-
0.25
2019(3)
0.48
-
-
 
   

Sources: Own calculations, forecast for 2019(3), fitted values otherwise, *seco releases (left: May 28, 2018, right: September 5, 2019).

Sample: 2000 (2) - 2019 (2), Forecast: 2019 (3), SECO data

Note: Forecast obtained by best nowcasting model.

 
       
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Nowcast. After several months of deepening conflicts over trade, tensions have eased a little bit which helped lift the latest Swiss GDP growth estimate year-on-year to now 1.2 percent. Nonetheless, the KOF Surprise Indicator has continued its 2019 downward trend confirming the overall weak 2019 performance of value added.
 
    This new estimate takes into account SECO‘s data releases for 2019 which saw a significant downwards revision as predicted. With SECO still being probably too optimistic with regard to the first quarter 2019, further downward revisions both of SECO quarterly estimates as well as nowcasting based on the KOF Surprise Indicator seems rather likely.  
    Outlook. Without clear signals from either government or private sector investment activities to pick up and continuing international trade disputes poor GDP growth figures will set the tone also in the near future.  
    Switzerland‘s new parliament with its as yet unseen shade of green and weakened right wing may seize the opportunity to set fiscal rules and practices on track for a more sustainable economic policy that would end a more than decade-long self-imposed spell of excessive austerity.  
    With the Swiss National Bank (SNB) having more or less exausted its economic stimulus fire power the federal budget defines the last line of defense against an unnecessary recession. Parliament and government would be wise to also tap into the vast ressources SNB's astronomical profits offer which is well possible without wreaking havoc on the SNB's capacity to pursue its policy goals.  
       
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NOTES    
Previous update
Standard error of regression*
0.74
Literature
Business cycle data (csv) download
History 2019-08-14 release
 
 
  2018-11-14 release
  Complete release history
  First release
Next release 2020-02-12
 
    *Standard error of regression refers to baseline model published in the first release.  
       
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