Credit Suisse publishes the “Swiss Monitor” for the third quarter of 2022.
The favorable labor market situation is mitigating the braking effect that the energy crisis is having on Swiss households. At the same time, the export industry is feeling the effects of the recession within the euro zone. According to the economists at Credit Suisse, economic growth is expected to slow down from the current 2.5% to 1% in 2023. On the central topic of the publication, they show that the risk of a wage-price spiral is low. Although many companies have already made extraordinary wage adjustments this year, the potential for future wage negotiations seems limited.
Switzerland is reacting less sensitively to the current energy crisis than its neighboring countries, but is by no means immune to price increases and rationing. In their forecasts, the economists at Credit Suisse assume that rationing can be avoided. However, in energy-intensive sectors such as metals and chemicals, production can be interrupted due to a lack of profitability. At the same time, the expected recession in the euro zone will weigh on export-oriented industry. In particular, the mechanical, electrical and metallurgical industries as well as the chemical industry must expect a drop in demand from abroad. On the other hand, exports of pharmaceutical products are hardly affected by changes in the economic situation in the short term. The EUR/CHF currency pair will remain below parity. Thanks to the significantly lower inflation in Switzerland, however, the export industry is coping relatively well with the current EUR/CHF exchange rate, as the lower cost increases reduce the price competitive disadvantage.
Consumption supports growth
Due to full employment, the employment situation of households remains intact despite widespread economic concerns and is usually a decisive factor in consumption. In addition, inflation generally cannot reduce purchasing power in our country. Thanks to job growth and the shift to higher-paying positions, total wages increased by 6.3% in the first half of 2022, ahead of inflation (2.5%). In addition, immigration is accelerating again and contributing to consumption growth. High wholesale energy prices, on the other hand, only have a limited impact on consumer behavior due to price regulation and the low weight of energy on household budgets. According to the economists at Credit Suisse, the inflation rate will remain above 3% until the end of the year, but will then slowly fall to stable levels.
Skills shortages and inflation are driving wages up
In the main topic of the new issue of the Swiss Monitor, the economists at Credit Suisse present clear indications that the risk of a wage-price spiral is low. Amid high inflation and skills shortages, wages are seeing their strongest rise in more than a decade (2022 forecast: 2%, 2023: 2.3%), but general wage moderation appears to be at work. In general, and especially in economically uncertain times like today, workers seem willing to forego short-term maximum wage increases in order to reduce the risk of unemployment and thus secure their long-term prosperity. This long-term vision pays off for employees, knowing that the proportion of economic output paid in the form of wages is extremely high in our country. In addition to wages, companies are now taking other measures to ensure their attractiveness as employers in a tight labor market. For example, they are increasingly opting for more flexible working conditions, as shown by a recent survey of over 150 Swiss companies conducted by Credit Suisse in cooperation with procure.ch.
Source: Federal Statistical Office, State Secretariat for Economic Affairs SECO, Credit Suisse
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