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UBS outlook, 3rd quarter 2007 - Swiss industry powering ahead
The economic outlook for Swiss industry remains positive. The latest UBS survey, conducted in June, shows growth prospects for this quarter intact thanks to full order books and a strong intake of new orders.
The solid uptrend in Swiss industry, characterized by high capacity utilization, continued in the second quarter of this year, according to UBS's survey of around 340 companies in June 2007. Expectations remain upbeat for the current quarter as well.
UBS Business Cycle Indicator points to robust economic growth
The UBS Business Cycle Indicator, which is derived from the survey's findings and is seen as a reliable barometer of the trend in real gross domestic product, continues to paint a very positive picture. It forecasts Swiss growth of 2.8% year-on-year for both the second and third quarters.
High capacity utilization creates new jobs
Orders received, sales, production, and earnings showed clear net increases yet again in the second quarter. Export orders were up for 53% of respondents, domestic orders for a similarly impressive 43%. Production and sales growth thus picked up further. Capacity utilization was exceptionally high at 90.7%. All this gave rise to a need for further recruitment, with 43% of the firms surveyed reporting a rise in new hires.
Steady improvement in corporate earnings
Companies are scarcely less bullish with regard to the third quarter of 2007, thereby confirming that the upswing is sustainable. All the criteria in the UBS survey were viewed with only marginally less optimism, and the indicators are still very much in positive territory. Almost a fifth of companies think that they have more scope to factor higher input costs into their selling prices. This, combined with higher sales volumes, is set to improve earnings for 38% of the companies surveyed, while only 16% expect a decline in this respect.
Export sectors at an advantage
The encouraging overall picture for the Swiss industrial economy disguises a rather more mixed picture in individual industries. Plastics, textiles, and printing and graphic design, for instance, saw a marked slowdown in business during the second quarter. These industries expect to underperform in the third quarter, too. By contrast, the export-oriented watch, chemicals/pharmaceuticals, and machinery industries are the most optimistic, but also metals and paper expect business to be good.
UBS Business Cycle Indicator and gross domestic product
(Change yoy in %)
Data (in %):
Head of Economic & Swiss Research
Tel. +41-44-234 25 60
Andreas Breitenmoser Bürki
Economic & Swiss Research
Tel. +41-44-235 43 39
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