KOF Business Situation Indicator: business situation virtually unchanged

The virtually unchanged overall level of the Business Situation Indicator conceals divergent trends. In manufacturing, the Business Situation Indicator has risen for seven months in a row since February of this year. In August, however, the increase was only very modest. The situation in construction has started to improve again, while business at project engineering firms and in financial and insurance services was no longer quite as encouraging as in July. Business activity in the retail sector is slowing significantly (see table T 3).

From a regional perspective there is a north-south divide. The situation in the more northerly regions of Northwestern Switzerland, Zurich, Eastern Switzerland, Espace Mittelland and Central Switzerland is stable to more negative than before. In contrast, the situation in the canton of Ticino and the Lake Geneva region is improving.

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. After a rather disappointing start to 2021 the Swiss economy is now booming. However, this positive trend has recently been weakening noticeably.

Explanation

Chart G 9 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 10 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 11) 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.