Business situation stabilised at the end of the year

The Business Situation Indicator for manufacturing did not fall in December for the first time in five months. The level of business activity – especially among intermediate-product manufacturers – stabilised. The manufacturing sector received a boost in demand at the end of 2022, with new orders and orders on hand increasing. This once again applied particularly to intermediate-product manufacturers. There was also a rise in the Business Situation Indicator for the project engineering and construction sectors, which are both linked to building activity. Business in the construction industry thus performed better than at any time since autumn 2013. Although order books were full to bursting, there was little change in production activity. Business activity in the retail sector improved, but – with the exception of food – it was not as encouraging as in December of the previous year. Although the Business Situation Indicator for the financial and insurance services sector also rose, it was still considerably lower than it had been in December 2021 (see table 1).

The Business Situation Indicator improved in Northwestern Switzerland, Ticino and the Zurich region. The situation in Eastern Switzerland, Espace Mittelland and the Lake Geneva region hardly changed. Only Central Switzerland saw a slight decline in the Business Situation Indicator.

The KOF Business Situation Indicator highlights 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 the economy was abruptly slowed by the pandemic in April 2020. After a rather disappointing start to 2021 the Swiss economy subsequently recovered. Although 2022 saw a continuation of the recovery in the first few months of the year, the economy has slowed noticeably since the summer. Despite the fact that the Business Situation Indicator and the Economic Barometer rose in December, the fundamental weakness of the economy has not yet been overcome.

Explanation:

Chart G 15 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 G 16 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 indicates that the situation has improved compared with the previous month.

The Business Situation Indicator in the KOF Business Cycle Clock (Chart G 17) 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 the 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 industry, the retail sector, construction, project engineering and financial services and insurance 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.