KOF Business Tendency Surveys: Business situation and forecasts are deteriorating
The KOF Business Situation Indicator for the Swiss private sector fell in March for the first time this year. Firms’ business forecasts for the coming half-year cooled for the second month in a row. The headwinds facing the Swiss economy are increasing.
The business situation is deteriorating in the majority of sectors surveyed in March. This applies to industries such as manufacturing and construction as well as – once again – financial and other services. The business outlook for manufacturing over the next six months is more cautious for the second month in a row. With the exception of January, firms in other services have been gradually lowering their business expectations over the past six months. In addition, business forecasts for the retail sector deteriorated in March. By contrast, the outlook for the construction industry, the project engineering sector and financial services was slightly more positive than in the previous month.
Viewed from a regional perspective, the Business Situation Indicator is falling primarily in northwestern and central Switzerland. It is also down in Ticino. Business activity is more or less stable in Espace Mittelland, eastern Switzerland and the Lake Geneva region. Assessments of the situation in the Zurich region are slightly more encouraging than in the previous month.
The KOF Business Situation Indicator illustrates companies’ current business situation. The KOF Economic Barometer, on the other hand, is an indicator of the economic outlook. The Business Cycle Clock shows that there were signs of a very modest economic recovery throughout 2024 (see Chart 3). However, no acceleration of this trend and no upturn materialised. There are still no signs of this situation changing significantly in the first few months of 2025.
Explanation:
Chart 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 2 shows the business situation in the main regions 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, for example, indicates that the situation has improved compared with the previous month.
The Business Situation Indicator in the KOF Business Cycle Clock (Chart 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 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 the manufacturing, retail, construction, project engineering, and financial services and insurance industries 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.
Contact
KOF Konjunkturforschungsstelle
Leonhardstrasse 21
8092
Zürich
Switzerland