Business situation virtually stable at the end of the year

From a sectoral perspective there was no uniform pattern of behaviour in December. The Business Situation Indicator for manufacturing fell slightly after rising in the previous month. Instead of expanding their output more substantially, companies increasingly met demand from their inventories. Although production plans for the next three months are more cautious than they were in November, they are still much more bullish than they were in the summer.

Business in the retail trade is now deteriorating. The business situation has been cooling for some time in the household appliances, textiles, DIY and furnishings sectors in particular. In contrast, the situation in the retail trade is not improving in sales segments such as mail order and market traders. Overall, however, customer footfall during the Christmas period was lower than it had been in the previous year.

The business situation in project engineering and among financial and insurance service providers has hardly changed.

The Business Situation Indicator for the construction industry rose slightly. Overall, the business situation there has hardly changed since late summer. However, business in the finishing trade in particular has improved recently, while it has deteriorated in the main construction trades. Construction activity has also fallen in the main building sector. The construction industry’s hopes rest primarily on orders in the civil engineering sector (see table T1).

Business trends also varied from region to region in December. Business activity deteriorated primarily in Northwestern Switzerland but also slightly in Espace Mittelland, the Zurich region and Ticino. In Central Switzerland it remains virtually unchanged, while in Eastern Switzerland and the Lake Geneva region it is more encouraging than before.

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 Swiss economy increasingly cooled in the spring and was still unable to overcome its weak phase in December.

Explanation:

Chart G13 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 G14 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 G15) 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.