A positive trade balance and small increase in consumer spending were offset by sluggish activity in industry, the wholesale sector and financial services, the state secretariat for economic affairs (Seco) said.
Public sector spending added no increase to the GDP, with general government and social security expenditures dipping 0.3 percent, Seco said.
The economy nonetheless rose by 0.6 percent from the second quarter of 2013, Seco said.
“Positive contributions to growth came in particular from housing and recreation and culture.”
Seco announced that it would be changing the way it reports GDP and its national accounts to match new European (ESA) standards.
The Swiss government is set to announce on September 30th what impact this will have on the GDP and other economic data.
The latest GDP numbers fell far short of the expectations of economists polled by financial agency AWP, who had anticipated seeing quarterly growth of between 0.3 and 0.9 percent and of as much as 2.1 percent from last year.
They also bear witness to a dramatic economic slowdown from the January-March period, when growth stood at 0.5 percent over the previous quarter and 2.1 percent year-on-year.
"It's a big surprise because most observers were not expecting such weak numbers," Julius Bär analyst Janwillem Acket told AFP.
Acket said the slowdown indicated that "the eurozone malaise has reached Switzerland to a certain extent", and that the country "is no longer an island of strong growth surrounded by a stagnating euro".
Capital Economic analyst Jennifer McKeown agreed, pointing out in a note that Switzerland seemed to be "feeling the effects of weakness in the eurozone, its major trading partner".
Acket said Switzerland's main problem was its external trade.
Going forward, the country will greater reflect "the modest average growth in eurozone countries," he said, pointing out that Switzerland's biggest trading partners in the bloc — Germany, France and Italy — all stood at zero or negative growth.
Following Tuesday's announcement, Acket said he had "brutally" revised down his outlook for Swiss growth, and now expects the country's economy to grow 1.1 percent this year, down from his previous estimate of two percent.
For next year, he is now forecasting growth of 1.6 percent, down from a previous forecast of 2.3 percent.
In an interview published on Sunday in the NZZ am Sonntag weekly, the head of Switzerland's central bank Thomas Jordan acknowledged that the economic atmosphere in the country had "clearly deteriorated."
"The macroeconomic risks have grown in recent weeks," he said.
The central bank, which in June said it expected to see economic growth of around two percent this year, is set to hold its next quarterly meeting on September 18th.