December

The KOF Economic Barometer remains virtually unchanged at the end of the year. The sharp declines that the barometer underwent in early 2020 have been offset by a rapid recovery during the summer. The barometer already reached a value above its long-term average again in August and was able to maintain this level during the second half of the year. However, the prospects for the Swiss economy remain subdued at the beginning of 2021 due to the ongoing pandemic.

Leading research institutes have sharply cut their economic forecasts for the euro area. For the fourth quarter of 2020, they now expect economic output to shrink by 2.7 percent. At the end of September, they were still expecting growth of 2.2 percent. The forecast was revised given the large number of coronavirus infections and the closure of parts of the economy, as was announced by ifo, KOF and Istat.

KOF expects GDP to fall by 3.5 per cent this year (baseline scenario). For 2021 and 2022 it expects to see growth of 3.2 per cent and 2.6 per cent respectively. The second wave of the pandemic is placing a strain on the labour market. Employment is likely to stagnate in the winter half-year, and historically low wage increases are expected for the next two years. The number of companies that believe their survival is at risk has risen again.

The KOF MPC figure for 10 December 2020 is -0.21. At today’s meeting, the ECB has recalibrated its monetary policy instruments, as the inflation outlook is weaker than previously anticipated.

The Coincident and Leading Global Economic Barometers show a deceleration in the rate of recovery of world economic activity in December, reflecting the arrival of a second wave of COVID-19 in various countries. The Coincident Barometer interrupts its sequence of increases. The Leading Barometer, which showed optimism in the previous months, is moving towards its long-term average.