KOF Business Situation Indicator: Business currently slightly more buoyant; many companies are sceptical about the year as a whole

Many companies are sceptical about the outlook for 2021 as a whole. From their current perspective, the pandemic represents more of a burden than an opportunity this year. Responding to a specific question on how the pandemic is likely to affect their total annual revenue in 2021, a good half of firms say they expect revenue to decline. Only 5 per cent expect revenue to receive a boost from the pandemic. Nevertheless, about 45 per cent of firms reckon that the pandemic will not have a significant impact on overall revenues this year. In response to a corresponding question about 2020, only slightly more than a third of the companies in these sectors indicated that revenue had been hardly affected at all by the pandemic. The outlook for 2021 thus points to modest advances out of crisis mode. 

The business situation among financial and insurance service providers and in construction continued to improve in February. Although the manufacturing sector has been on a slightly bumpy journey since the autumn, it is generally trending upwards. Business at project engineering firms is no longer quite as strong as it was in January. February saw a sharp downward correction in business in the retail sector, which was not surprising in view of the shop closures.

From a regional perspective, business in the Lake Geneva and Zurich regions performed fairly well, while business activity in all other regions – Central Switzerland, Eastern Switzerland, Northwestern Switzerland, Ticino and Espace Mittelland – slowed slightly.  

The KOF Business Situation Indicator illustrates companies’ current business situation. The KOF Economic Barometer, on the other hand, is an indicator of the economic outlook. The Economic Clock shows that the economy in 2020 was abruptly slowed down by the pandemic in April. Having recovered significantly during the summer months, the economy was slightly fragile from autumn onwards. Following a rather disappointing start to 2021, however, the outlook is now better.

Explanation:

Chart G 15 shows the KOF Business Situation Indicator across all sectors included in the survey. The business situation of sectors that are only surveyed quarterly is kept constant in the interim months.

Chart G 16 shows the business situation in the main regions as defined by the Swiss Federal Statistical Office. The regions are coloured differently to reflect their business situation. The arrows within the regions indicate the change in the situation compared with the previous month. An arrow pointing upwards indicates that the situation has improved compared with the previous month.

The Business Situation Indicator in the KOF Economic Clock (Chart G 17) is plotted against the KOF Economic Barometer. The indicator reflects the current business situation, while the barometer is a leading indicator of changes in activity. The clock can be divided into quadrants. During the recovery phase the business situation is below average but growth prospects are above average. At the peak of the economic cycle the situation and prospects are both above average. During the slowdown phase the situation is above average and the prospects are below average. At the bottom of the economic cycle the situation and prospects are both below average. Ideally the chart runs through the quadrants in a clockwise direction.

The KOF Business Situation Indicator is based on more than 4,500 reports from firms in Switzerland. Companies in industry, the retail sector, construction, project engineering, and financial and insurance services are surveyed monthly. Businesses in the hospitality, wholesale and other services sectors are surveyed during the first month of each quarter. These firms are asked, among other things, to assess their current business situation. They can rate their situation as either ‘good’, ‘satisfactory’ or ‘poor’. The net balance of their current business situation is the difference between the percentages of ‘good’ and ‘poor’ responses.