KOF Business Situation Indicator: Business situation improving; availability of intermediate products problematic

Business activity improved in all sectors surveyed in May (see T 1). The situation in manufacturing is predominantly encouraging. The last time this sector reported being in a stronger position was in 2018, which was an excellent year for the Swiss economy and for manufacturing in particular. Business in the retail sector, which is outstanding and significantly more buoyant than before the pandemic, also continues to improve. In addition, the Business Situation Indicator is visibly trending upwards in the construction industry, in the project engineering sector and among financial and insurance service providers.

The availability of inputs and goods could increasingly prove to be a constraint on the recovery. Responding to a specific question on restrictions, almost 50 per cent of the firms surveyed in the manufacturing and construction sectors now say that they are concerned about the timely availability of intermediate products. Similar concerns are also growing in the retail sector.

The Business Situation Indicator is rising across the board on a regional basis as well (see G 7). The recovery was noticeable in all regions in May: it was strongest in Eastern Switzerland and Espace Mittelland and was slightly more moderate in the regions of Zurich, Central Switzerland, Northwestern Switzerland, Ticino and Lake Geneva.

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 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 (G 8). After a rather disappointing start to 2021 the Swiss economy is now on an upward trajectory.

Explanation:

G 6 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.

G 7 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 (G 8) 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.