Slight easing of the business situation
The KOF Business Situation Indicator for the Swiss private sector showed a noticeably positive trend in May for the first time this year. Even though the business situation is currently much less favorable than at the beginning of the year. Business expectations for the coming six months are more confident than in the previous month. Despite the smouldering trade conflicts, Swiss companies breathed a sigh of relief in May.
On the sector side, the business situation is showing a mixed picture. The business situation in the retail trade is improving markedly. The business situation also brightened in the construction and project planning sectors and eased in manufacturing. By contrast, the business situation in financial and insurance services and other services is cooling down again.
In terms of business expectations for the coming six months, the brightening is slightly more broadly recognizable. Only in other services are business expectations slightly gloomier. In all other economic sectors surveyed - manufacturing, retail, construction, project planning, financial and insurance services - business expectations in May are more favorable than before.
In the manufacturing industry, the tariff threats from the United States in April led to a sharp downward revision of demand expectations and production plans. In May, the pessimism in this regard is clearly easing again.
Regional perspective
From a regional perspective, the upturn is mainly noticeable in a southern arc of Switzerland, namely in the Lake Geneva region, Ticino and eastern Switzerland. The business situation is little changed in Espace Mittelland, Central Switzerland and Northwestern Switzerland. In the Zurich region, the business situation is deteriorating.
The KOF Business Situation illustrates the current economic situation of companies. The KOF Economic Barometer, on the other hand, is an indicator of the economic outlook. The economic clock shows that there were signs of a very slight economic recovery throughout 2024. However, there was no acceleration in development and no upturn. In May of this year, the situation eased somewhat compared to April, but economic development remains sluggish.
Explanation:
Chart 1 shows the KOF Business Situation across all economic sectors included in the survey. For economic sectors that are only surveyed quarterly, the business situation is kept constant in the interim months.
Figure 2 shows the business situation in the major regions according to the Federal Statistical Office. The regions are colored differently depending on the business situation. The arrows within the regions indicate the change in the situation compared to the previous month. An arrow pointing upwards means, for example, that the situation has improved compared to the previous month.
In the KOF Business Cycle Clock (Chart 3), the business situation indicator is plotted against the KOF Economic Barometer. The situation indicator reflects the current economic situation, while the barometer is a leading indicator for 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. During the economic peak, the situation and prospects are above average. During the slowdown phase, the situation is above average and the prospects are below average. In the economic downturn, the situation and prospects are below average. Ideally, the graph runs through the quadrants in a clockwise direction.
The KOF Business Situation is based on more than 4,500 reports from companies in Switzerland. Companies in industry, retail, construction, project planning and financial and insurance services are surveyed on a monthly basis. Companies in the hospitality, wholesale and other services sectors are surveyed quarterly, in the first month of each quarter. Among other things, the companies are asked to assess their current business situation. They can characterize their situation as "good", "satisfactory" or "poor". The balance value of the current business situation is the difference between the percentages of "good" and "poor" answers.
Contact
KOF Konjunkturforschungsstelle
Leonhardstrasse 21
8092
Zürich
Switzerland