KOF Business Situation Indicator continues to fall

The business situation in November varied from sector to sector. The Business Situation Indicator for the manufacturing and construction sectors as well as for the project engineering sector – which is linked to building activity – declined, while it made up ground in the retail trade and in financial and insurance services.

The Business Situation Indicator for the manufacturing sector continued to fall, with the chemicals and pharmaceuticals sub-sector in particular – and within it the chemical industry – slowing business activity. Overall, however, incoming orders in the manufacturing sector have picked up and production has increased. Looking ahead to the next three months, companies continue to expect demand to rise. They hope that the bleakest period, particularly in terms of foreign demand, is behind them.

The business situation in the construction industry is also cooling, with building activity barely growing and being increasingly curbed in the main construction sub-sector. Firms are no longer as satisfied with their existing order books as they were in the first half of this year.

In contrast, business among retailers is improving, with survey respondents expecting sales in the near future to increase more frequently than before. Business activity in the financial and insurance services sector is also improving – particularly for banks. Looking ahead, however, banks expect demand from corporate clients to decline, although private customers are likely to ensure rising demand (see table T1).  

The trend in November also varied from one region to another. While the Business Situation Indicator fell in Eastern Switzerland, Northwestern Switzerland and the Zurich region, it hardly changed in Central Switzerland and the Lake Geneva region. The business situation is brightening in Ticino and, especially, Espace Mittelland.

The KOF Business Situation Indicator illustrates 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 temporarily stabilised at the beginning of 2023. However, the economy increasingly cooled in the spring and was still going through a weak phase in November.

Explanation:

Chart G1 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 G2 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 G3) 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.