August

The KOF economic barometer rose sharply in August, now for the third month in a row. The plus was almost the same as in the previous month, when the barometer showed the strongest monthly increase since the beginning of the calculated values in the early 1990s. The crash in the spring of this year was, however, also the worst in the history of the barometer. According to this, the Swiss economy is in the upswing phase of what appears for the time being a V-shaped recession.

As expected by KOF, the Swiss economy experienced a deep red 2nd quarter, even if the slump was less severe by international standards. However, the situation is very uneven between and within the individual sectors. The consequences of the crisis are also clearly evident in the labour market - the low point has probably not yet been reached. KOF is leaving its forecast for GDP growth in 2020 almost unchanged at -4.7%. In 2021, it expects a plus of 3.7%.

The Coincident and Leading Global Economic Barometers are rising in August, sustaining the tendency towards a world economic rebound. While the Coincident Barometer continues to gradually move away from the trough of the crisis, the Leading Barometer has advanced faster, signalling confidence for the recovery of world GDP in the coming months. This result should be interpreted cautiously given the high degree of uncertainty on both the economic and health fronts.

Between March and July of this year, 21 per cent fewer companies in Switzerland went bankrupt than in the same period of last year. The support measures taken during the coronavirus crisis are likely to play an important role in this regard. It is still too early to sound the all-clear, however, as some bankruptcies have probably only been postponed. Bankruptcies have tended to increase gradually after previous economic crises as well.

The business situation in most sectors has improved slightly. This is shown by the KOF Business Situation Indicator, which has risen significantly for the first time since April. However, the situation remains challenging. 14 per cent of companies believe that their survival is at risk. In terms of economic performance, KOF expects GDP to decline by 4.9 per cent this year. If a second wave of COVID-19 were to occur, GDP would be expected to fall by 6 per cent this year.

In the third quarter of 2020 the KOF Employment Indicator is recovering slightly from its historic slump in the second quarter. Despite the lifting of the lockdown, however, the indicator remains clearly in negative territory at -12.9 points. In industry and the hospitality sector the outlook is almost as bad as it was three months ago. Further job cuts are expected in the coming months.