Economy in Brief

Swiss confidence improved in the first quarter of 2023 rising to -30.2 from -46.5 in Q4 2022. Confidence had previously deteriorated in the third and fourth quarters. In terms of four quarter changes, confidence is still in a broad deteriorating cycle; it's fallen by 21 points over 12 quarters, by 16 points over eight quarters and by 26 points over four quarters.

The outlook for confidence improved sharply in the first quarter. The reading of -16.3 is up sharply from the -57.2 logged at the end of 2022. But the confidence outlook is lower by 11 points over twelve quarters, slightly higher, rising by 0.2 points over eight quarters, and is still net lower over four quarters, falling by 37.4 points. The outlook has been on a bit of a roller coaster in the wake of COVID and the uneven recovery and inflation it spawned.

Past confidence improved in Q1 2023 at -49, compared to -59.9 at the end of 2022. Past confidence is still slipping, having worsened by 26.2 points over four quarters after improving by 45.1 points over eight quarters, and worsening by 55.1 points over 12 quarters. The 12-quarter comparison takes us back to the Q1 2020 level when COVID first struck.

The price outlook for Switzerland has fallen to 90.3 from 104.5 as of the first quarter of 2023. Over four quarters the price outlook is now net lower down by 3.6 points; over eight quarters, however, it's higher by some 46 points, and over twelve quarters it's higher by 35 points. Obviously, inflation is still stirring. Looking at past prices, the first quarter assessment is slightly higher than the assessment for the fourth quarter at 132.7 compared to 130.7 The four-quarter change is still higher by 49.9 points; however, that's smaller than the nearly 115-point gain over eight quarters and then there is the 85-point gain over 12 quarters. These readings flag, of course, past significant rises in inflation and while past increases are still the rule the recent past has shown some improvement. And, of course, the outlook shows small declines in the price outlook – there is a progression at work.

Job security perceptions increased smartly in the first quarter of 2023 as the reading rose to plus 1.6 from -25.1 in the fourth quarter. Over 12 quarters, assessments improved by 45.9 points, over eight quarters they improved by 124 points, over four quarters they are better by 60.8 points. Much of the improvement is very recent; COVID plays a big part and those past developments and in causing people to become more worried about their job security. Now, even with the war in Ukraine in progress, and having been in progress for a year, job security in Switzerland has improved smartly.

Personal finance metrics haven't changed that much in recent quarters; the outlook for financial conditions shows a very similar reading for Q1 2023 to what it logged for Q2 2022 with some deterioration in between. Past financial conditions over the last four quarters have also been relatively stable. However, all the changes in financial conditions over four, eight, and 12 quarters show that there has been deterioration to some degree afoot- there is only one quarter in a row of improvement in financial conditions and their outlook.

The spending environment has not changed too much over the last three quarters; however, the changes over four quarters, eight quarters, and twelve quarters show deterioration although a deterioration that has been slowing.

Queue standing assessments The final column of the table evaluates the Q1 2023 readings relative to their historic performance back to 1980. On that timeline, confidence measures are extremely low, inflation measures are elevated, job security emerges as rather solid at an 86.7 percentile standing. Job security has been better less than 14% of the time. However, personal finances under current circumstances show a bottom 16% standing and the outlook has a bottom 2.3% standing. In addition, the likelihood of making a special purchase - despite solid job security - is at a very low 1.7 percentile standing. The present assessment for consumer confidence has only a 6.4 percentile standing although the outlook is better with a nearly 35-percentile standing; that's still a lower one-third-of-queue reading.

At today’s meeting of the Federal Open Market Committee, the targeted Federal Funds Rate was raised by 25 basis points to a range of 4.50% - 4.75%. The action followed one 50 basis point increase and four consecutive 75 basis point increases. The rate was set to the highest level since October 2007.

The Fed’s statement following the meeting contained the following indications.

“The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time.”

“Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated. The Committee is highly attentive to inflation risks.”

“The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously released plans.”

Today’s action was endorsed by each member of the FOMC.

The Fed issued a statement concerning the Longer-term Goals of Monetary Policy and it can be found here.