The Swiss franc has posted substantial losses on Tuesday. On the US trade session, USDCHF is trading at 0.8952, up 0.4% on the day.
Switzerland’s economy shrank in the first quarter by 0.5%, compared to the forecast of -0.4%. This follows a low gain of 0.1% in Q4. The soft performance in Q1 can be attributed to weakness in the service sector, as tighter health restrictions to combat Covid put a crimp in business activity and consumer spending. Retail sales in April were down 4.3% (MoM), as consumers are playing it cautiously due to the economic uncertainty.
Manufacturing remains a bright light in the Swiss economy, as an improving global economy has increased demand for Swiss products. Manufacturing PMI accelerated for a seventh consecutive time in April, as the PMI rose to 69.9, up from 69.5. This was just shy of the consensus of 70.0 and is a record high for the survey, which began in 1995.
The respected KOF Economic Barometer continues to break new records. The index rose to 143.2 in May, up from the April reading of 136.4 (revised from 134.0). The significant increase was driven by strong numbers from manufacturing and foreign demand. The barometer has now risen for a fourth straight month, and the near-term outlook for the Swiss economy remains positive, if the battle against Covid continues to progress.
Switzerland, like the bordering EU, had a sluggish vaccine rollout which led to a revival in Covid cases early in 2021. However, with the vaccine program gaining traction as Covid-19 numbers are expected to decrease, which should lead to stronger economic growth in the second half of the year.
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