No. 169, January

The research landscape in Switzerland is becoming more diverse again. Smaller firms and companies offering modern services in particular are increasingly conducting research and development (R&D). This innovative business climate is making the Swiss economy more resilient to crises such as COVID-19.

The KOF Business Situation Indicator rose slightly in December, having previously fallen twice in a row (see chart G 15). The recent recovery trend continued, with business activity improving in all sectors surveyed in December. Although the Swiss economy is operating in a challenging environment, it is not in crisis.

New survey data provide insights into the price-setting behaviour of Swiss companies. They shed light on price setters’ motives when they are reviewing, forming and adjusting their prices, as well as the reasons why they do not adjust their prices. In particular, they illustrate how prices are set so as to take account of the competing interests between customers and competitors.

In Europe, persistently high inflation and high energy costs are likely to continue to weigh on demand. In the United States, inflation is leading to a loss of purchasing power, while rising interest rates are dampening investment. The outlook for the Chinese economy has also darkened.

KOF expects interest rates to continue to rise this year in the euro area, the United States and Switzerland. It predicts that inflation will eventually fall but will remain high. The two economists Alexander Rathke and Pascal Seiler explain why in an interview.