Have we just witnessed in October the changing of the guard from the USA to China? History will tell. The meeting of the two heads of state certainly showed a self-confident China and a previously little-known yielding of the USA. The financial markets are glad that an escalation between the two great powers was avoided. Thus, stock valuations rose significantly worldwide in an otherwise little-changed economic environment, except in Switzerland, and the gold rally is taking a break.
Video from 03.11.2025
Economic Growth: still modest but positive growth
The growth figures for the third quarter are being published step by step, so far with few surprises but also little momentum. In addition, due to the shutdown in the USA, the growth of the world’s largest economy has not yet been published.
China’s economy grew by a modest 1.1 percent compared to the previous quarter, although China’s growth figures should be interpreted with caution. High US tariffs, persistently weak domestic demand, and a struggling real estate sector are holding back growth.
The eurozone as a whole recorded quarterly growth of 0.2 percent, slightly above expectations. A look at the major European economies shows that the figures for Germany and Italy were disappointing at 0.0 percent each. France, on the other hand, surprised with a strong 0.5 percent for the quarter, clearly exceeding expectations.
Inflation: Slight improvements in the USA and UK
Recently, the development of inflation has been very heterogeneous. Most industrialized nations are still struggling with excessively high core and overall rates, but country-specific movements show different dynamics.
Recently, the UK and the USA have delivered positive surprises. The core rate in both countries has unexpectedly fallen to 3.5 percent and 3.0 percent, respectively. In the USA, the expected increase in inflation due to import tariffs has yet to materialize. In contrast, there was a negative surprise in Japan. After the inflation rate had slightly declined over the summer, core inflation recently rose again unexpectedly by 0.2 percentage points to 2.9 percent year-on-year.
In the eurozone, the situation has recently been stable. Germany and the eurozone as a whole continue to show an unchanged core rate above the 2 percent target, at 2.8 percent and 2.4 percent, respectively. This is mainly due to persistently high services inflation. In Switzerland, however, the dynamic has been reversed for some time. The overall rate fell again in October to just 0.1 percent, with the core rate at 0.5 percent.
Monetary Policy: No major changes
The balance sheet total of the Swiss National Bank (SNB) continues to increase. This is likely due to gains from the SNB’s investments. This comes at a time when the SNB is already under pressure to intervene again in the foreign exchange market to prevent the Swiss franc from appreciating too much, which would further fuel the balance sheet expansion. However, this approach is risky, as the United States in particular has recently pressured Switzerland and the SNB to refrain from such interventions.
The US Federal Reserve (Fed) is also in a phase of balance sheet reduction, although the pace is moderate compared to previous phases. It was also not surprising that the Fed decided to lower the key interest rate. This step was justified by the fact that, despite inflation remaining too high, the focus is now on the weakening labor market.
