KOF business situation remains encouraging

The stable business situation conceals slightly different trends from sector to sector. The Business Situation Indicator for manufacturing is recovering and has managed to make up for a small amount of the previous month’s decline. The situation in the retail sector improved again, while it remained stable in the construction and project engineering sectors. In contrast, business activity in the financial services and insurance sectors continues to slow (see table T 1).

From a regional perspective there is a slight east-west divide. While the business situation in the Lake Geneva region and Espace Mittelland is tending to improve, it is either stable or deteriorating in the other regions – Ticino, Northwestern Switzerland, Zurich, Eastern Switzerland and Central Switzerland. Central Switzerland is the main region to feel headwinds (see chart G 11).

The KOF Business Situation Indicator highlights 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 was abruptly slowed by the pandemic in April 2020 (see chart G 12). After a rather disappointing start to 2021 the Swiss economy subsequently recovered. Despite slowing slightly in the autumn, this recovery is continuing.

Explanation:

Chart G 10 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 11 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 indicates that the situation has improved compared with the previous month.

The Business Situation Indicator in the KOF Economic Clock (Chart G 12) 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 outlook 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 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.