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GDP forecast based on
semantic business cycle identification |
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Release
2020-11-13 |
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Figure 1:
Business cycle indicator and Swiss GDP with forecast |
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Forecast
update. The Spring "Shutdown" has brought a deep sigh of relief for the Swiss economy, lifting the «KOF Surprise Indicator» from its all-time low of -0.13 back to its previous level of about -0.049. This new value implies a 3.8 percent drop in GDP year-on-year in 2020, third quarter which is much better than -5 percent recorded a quarter earlier. |
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Table:
Swiss real gross domestic product with
forecast |
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Date |
Year-to-year growth (%) of
Swiss real gross domestic product (GDP) |
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fitted / forecast |
standard error |
seco estimates* |
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2020(1) |
-0.58 |
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-1.35 |
-0.60 |
| 2020(2) |
-5.03 |
- |
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-8.27 |
| 2020(3) |
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0.74 |
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- |
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Sources: Own calculations, forecast
for 2020(3), fitted values otherwise, *seco releases (left: June 3, 2020, right: Sep 27, 2020).
Sample: 2000 (2) - 2020 (2),
Forecast: 2020 (3), SECO data
Note: Forecast obtained by best
nowcasting model. |
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Nowcast.
While the pandemic lost steam during the third quarter the Swiss economy used this extra breathing space to bounce back quite impressively, the KOF Surprise Indicator tells. |
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Its latest reading of -0.049 compares to a record -0.13 in the previous quarter lifting the y-o-y growth rate of Swiss real GDP off the ground to -3.8 percent from -5 percent three months ago. |
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Outlook.
Unfortunately, the spectre of another shutdown of the economy in response to the already noticeable rise in infection numbers observed in August has now materialised although in a «light» version only. Even worse, this shutdown came rather late and could, therefore, neither significantly slow down the spread of the virus neither safe the economy from yet another grim quarter. |
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Provided that the delayed measures will eventually reduce infections 2020 might still well see a recession in only single digit numbers of about -5 to -6 percent annual change in value added. |
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As already noted in the August release, the prospects for the next couple of months remains dependent on two basic issues of which only the scond can be controlled. First, the recovery must not be killed in its infancy by a renewed surge in infection rates. Second, the Swiss federal government must further provide sufficient stimulus and not even think of austerity. |
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Special feature: Modern macro models suffer from an inherent contradiction: agents optimize over an infinite horizon while readers are made to believe that model updates are coming soon, sooner than infinity. This contradiction means that these models are neither rational nor forward-looking like their authors wants us make to believe. Gabaix (AER, 2020) is a point in case. Read on» |
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*Standard error of regression refers
to baseline model published in the first release. |
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Quarterly
nowcast update. Order your free personal quarterly email
alert with the latest GDP estimate based on the «KOF surprise
indicator». Subscribe here»
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