KOF Business Situation Indicator: broad-based improvement

The business situation in March improved in all sectors surveyed – manufacturing, construction, project engineering, retail, financial services and insurance (see T 1). The improvement in the retail sector is striking, with shops predominantly reporting encouraging sales. Although the situation is not as buoyant as it was last summer, the other sectors are all making considerable progress this month.

The business situation improved across the board from a regional perspective as well (see G 19). The only exception was the Lake Geneva region, where the situation had improved significantly in the previous month but was unable to sustain this gain. Business in all other regions – Eastern Switzerland, the Zurich region, Central Switzerland, Northwestern Switzerland, Ticino and Espace Mittelland – improved in March.

The KOF Business Situation Indicator illustrates companies’ current business situation. The KOF Economic Barometer, on the other hand, is an indicator of economic prospects. The Economic Clock (see G 20) shows that the economy was abruptly slowed by the pandemic in April 2020. Having staged a strong recovery in the summer months, the level of economic activity fluctuated slightly from autumn onwards. After a rather disappointing start to 2021, the current improving trend is now consolidating noticeably.

Explanation:

Chart G 1 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 2 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 upward-pointing arrow means, for example, that the situation has improved compared with the previous month.

The Business Situation Indicator in the KOF Economic Clock (Chart G 3) 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, financial services and insurance 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.