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In the second quarter 2019, global trade contracted by close to 3% (annualised) compared to the preceding quarter. The export-heavy German economy is particularly affected by restrained global demand and China’s economic slowdown. The economy is also flagging in Italy. Irrespective of these trends, the situation on the European labour market is improving.

The Swiss economy is booming. KOF expects a comparatively high GDP growth rate of 2.5% this year and a relatively favourable economic trend in 2019 (1.8%). There is good news from the employment market, which should record a slight decline in the unemployment rate. Inflation will slowly move into the positive range.

Recently, inflation rates in the eurozone have picked up again. Nevertheless, the core inflation rate remains low. To get a better understanding of the inflation dynamics, KOF has developed an inflation model, which shows that the inflation trend in the past few years was predominantly affected by the decline in oil prices. In the course of the eurozone’s economic recovery and the lapse of the second-round effects of the drop in energy prices, the core inflation rate is likely to rise again.

After turbulent times for a large number of Swiss businesses, the available economic indicators, such as the KOF Economic Barometer and the KOF Business Tendency Surveys, are now pointing towards a somewhat more optimistic assessment of Swiss economic performance. In terms of overall economic development, the KOF is therefore forecasting Swiss gross domestic product (GDP) growth of 1.5 per cent this year and (unchanged) 1.9 per cent next year.

How high is the quality of the direct federal tax estimates provided by the Federal Tax Administration (FTA) and the Federal Finance Administration (FFA)? Commissioned by the two administrations, KOF has carried out a detailed analysis of the respective revenue forecasts. The results of this analysis show that, although the forecasts are generally unbiased, parts of the forecasts could be improved.