Above-average economic growth compared to prior quarter
In the second quarter of 2024, real gross domestic product in Switzerland recorded an above-average rise of 0.7% compared to the prior quarter. The main driver of this development was strong growth in the chemical/pharmaceutical industry. By contrast, other branches of industry recorded a negative growth rate, and while value creation in the services sector may have developed positively compared to the previous quarter, it nonetheless remained below the long-term average. Likely sources of positive stimuli include a positive Swiss labour market situation when viewed in a historical context, robust domestic demand, and rising investment in construction.
Inflation consolidates in target bandwidth of Swiss National Bank
Inflation amounted to 1.1% in August 2024, thereby remaining within the target bandwidth of the Swiss National Bank (SNB). A key contributor of deflationary development at the moment is the imported goods sector, not least due to the appreciation of the Swiss franc over the summer of 2024. By contrast, rising apartment rents – which comprise some 18% of the benchmark basket of goods – have been putting upward pressure on the rate of inflation. If rents are stripped out of calculations, inflation would have amounted to just 0.4% in August.
Decline in interest rates provides tailwind for property market
The stable development of inflation gave the SNB the freedom of manoeuvre to reduce its key interest rate further in September to 1%. The previous interest rate cuts of March and June 2024 had already impacted positively on demand for upmarket residential property. Property investments are now becoming increasingly appealing alternatives to fixed-income bonds. Market activity in the transaction area has already picked up again, but the sums buyers are willing to pay for investment properties are still in modest territory.