KOF Business Situation Indicator edges up

The Business Situation Indicator for the manufacturing sector fell again in June. This was its fifth decline in a row. Although order intake is slowing less frequently, orders on hand are currently decreasing. Companies are therefore less likely to increase production in the near future and are also more reluctant to order intermediate products than they were before. The Business Situation Indicator for the retail trade was marginally lower than in the previous month. Although sales of goods continue to weaken, retailers expect sales to perform better in the near future.

The business situation is improving in each of the other sectors surveyed. This is the case for financial and insurance service providers. The improvement in business activity is even more pronounced in the building-related sectors of project engineering and construction, which have managed to recover from their poor performance in the previous month. Although firms in the construction industry have barely raised their prices, they have improved their earnings (see table T 1).

The picture is very mixed from a regional perspective and thus reflects the impression that the economic trend currently shows no clear direction (see chart G 17). The business situation in the Lake Geneva region, Central Switzerland and the Zurich region is more encouraging than it was in the previous month, while it remains virtually unchanged in Eastern Switzerland and Ticino. In contrast, the situation in Espace Mittelland and Northwestern Switzerland has deteriorated.

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 2022 saw a continuation of the recovery from the pandemic in the first few months of the year. From the summer onwards, however, the economy slowed noticeably. Although the economy stabilised temporarily at the beginning of 2023, it is now slowing (see chart G 18).  

Explanation:

Chart G 16 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 17 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 (see chart G 18) 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 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.