KOF Business Situation Indicator: Swiss economy currently robust

The business situation has been improving throughout almost all sectors of the economy. It has gained ground in the manufacturing sector for the second month in a row, despite the outbreak of the Coronavirus epidemic in China in January. In addition, the business situation indicator has improved in the construction, project engineering and retail trade sectors. The business situation has only declined further for financial and insurance service providers. Results for wholesalers, hotel and catering companies and the other service providers were last published in January. In those results, the business situation improved for wholesalers and other service providers, whilst declining for hotel and catering companies.

Considered in regional terms, the changes to the business situation have been largely minor. The business situation has hardly changed at all in the Lake Geneva region, Espace Mittelland, Eastern Switzerland and the Zurich region. It has improved in North West Switzerland, whilst it has worsened in Central Switzerland and in Ticino.

The KOF Business Situation illustrates the current economic situation of businesses. By contrast, the KOF Economic Barometer is an indicator of prospects for the economy. The Economic Clock shows that the economy was under pressure in 2019. The KOF Economic Barometer remained below its long-term average level for the entire year whilst the business situation gradually worsened. The prospects for the Swiss economy have become more favourable since the start of 2020. Whether expectations are confirmed over the coming months will also depend upon the further development of the Coronavirus epidemic.

Explanation

Chart G 12 presents the KOF business situation across all sectors covered by the survey. The business situation in sectors which are surveyed on a quarterly basis is kept constant during the intervening months.

Chart G 13 presents the business situation in the main regions pursuant to the Federal Statistical Office. The regions are coloured according to business situation. The arrows in the regions indicate the change in the business situation compared to the previous month. An upward-pointing arrow, for instance, indicates that the situation has improved over the previous month.

The KOF Economic Indicator (Chart G 14) plots the Business Situation Indicator against the KOF Economic Barometer. While the Business Situation Indicator represents the current economic situation, the Barometer provides an early indicator of any changes in activity. The clock can be divided into four quadrants. During the recovery phase the business situation is below average, whilst growth prospects are above average. During the boom phase both the business situation and prospects are above average. During the cooling phase the business situation is below average whilst prospects are declining. During the slump phase both the business situation and prospects are below average. Theoretically, the chart should move through the quadrants in a clockwise direction over time.

The KOF business situation is based on more than 4,500 reports from businesses in Switzerland. Each month, companies are surveyed in the economic sectors of industry, retail trade, construction, project engineering and financial and insurance services. Businesses in the hotel and catering sector, wholesalers and other service providers are surveyed on a quarterly basis in the first month of each quarter. Among other questions, the companies are asked to assess their current business situation. They may class their situation as “good”, “satisfactory” or “bad”. The balance of the current business situation is the percentage difference between the answers “good” and “bad”.