Business situation improving at the beginning of autumn but some firms becoming more sceptical

Since May 2020 the KOF Business Tendency Surveys have been supplemented in part with specific questions on the current coronavirus crisis. In October around 10 per cent of the firms surveyed stated that they considered their survival to be seriously at risk. This proportion increased slightly in September and October after having fallen over the summer. By far the greatest fear of bankruptcy is in the hospitality sector (35 per cent), followed by other service providers (10 per cent). Smaller firms and businesses in Ticino and the Lake Geneva region also tend to regard their survival as being more at risk.

The decline in demand continues to be the biggest constraint on companies, with 61 per cent of those surveyed saying that they are suffering from this. The second most important restriction (21 per cent) is customers’ insolvency or deferral of payment.

Situation has recently improved in all areas; consequences of the new restrictions still unclear

A total of more than 4,500 firms provided information on their business situation in the latest KOF Business Tendency Surveys. All of the sectors surveyed were gradually emerging from the crisis in October. The Business Situation Indicator for the retail sector was already exceeding its pre-crisis levels back in the summer. It is the only sector whose situation is now more encouraging than it was before the coronavirus crisis. The Business Situation Indicator for financial and insurance services is close to its pre-crisis levels. In the other sectors surveyed – manufacturing, construction, project engineering, wholesale, and other services – the situation also improved in October but is still much less encouraging than it was before the crisis. The hospitality industry is a particularly long way from returning to its pre-crisis levels.

Faced with rising numbers of infections, Switzerland’s Federal Council tightened the relevant restrictions on 18 and 28 October. Only very few responses to the Business Tendency Surveys were received after the restrictions were tightened for the second time on 28 October. The very latest developments are therefore hardly captured at all in the results. Over the course of October, however, companies in some sectors became more sceptical about their prospects going forward. For example, firms that responded to the surveys later in the month were more likely than early reporters to revise their expectations for future demand downwards compared with the previous month. This was particularly true of the manufacturing sector, other service providers, project engineering, wholesalers and financial and insurance services. So far, however, these responses do not point to the sort of slump that we saw back in the spring.