Communiqués de presse


UBS Company Survey, June 2001 Swiss industrial sector weaker than expected

| Media Releases Switzerland

Swiss industry is in a far more sluggish state than many observers had thought. The latest UBS company survey reveals that, in all but one sectors, business in the second quarter was worse than companies forecast three months ago, although a slight improvement is expected for the current quarter.

The pace of industrial growth slowed sharply in the second quarter. The results of the UBS quarterly survey of around 350 industrial companies, which has been conducted since 1975, have proven to be a reliable indicator of short-term trends in the Swiss economy, and the latest survey, conducted in June 2001, suggests that growth will deteriorate during the summer period. The UBS business cycle indicator, the trend barometer for GDP, indicates a sharp drop in the growth rate to 1.3% for the second quarter of 2001. Although the expectations of the survey participants for the third quarter are slightly more optimistic, the indicator, which is based largely on actual results, points to a continued slowdown in the short term. The poorer than expected results were one of the main reasons for UBS's decision in mid-June to revise its 2001 GDP forecast down from 2.2% to 1.6%.

Expectations for second quarter not met

The downturn in the industrial sector gathered pace in the months from April to June. As a result, the relatively upbeat forecasts in the March survey were not met. Swiss exports in particular were off sharply, which caught companies off guard. Hopes for a more robust trend in domestic demand were also not fulfilled. On balance, only 2% of survey participants reported that overall orders received were higher in the second quarter than in the prior year; in March, a net 28% of the companies expected a positive trend. Since industrial companies boosted their production considerably despite a stagnation in orders, work backlogs, which had jumped dramatically as the economy raced ahead last year, were down as of end-June compared to the prior year. Higher domestic deliveries in particular helped boost turnover. Inventories were mostly stable compared to the prior quarter; the overall picture resulting from the survey was slightly positive. Even though most sectors succeeded in pushing through modest increases in prices, only food and watchmaking posted further earnings gains. For the majority, earnings were either stable or even down slightly due to rising expenses for staff and capital spending as well as higher purchase prices. In the April to June period, no less than 23% of the companies reported an increase in headcount; only 15% reported a decrease. As of the end of June, the number of persons employed at the firms surveyed was once again above the level of the prior-year period.

Momentum to pick up slightly in third quarter

The trend for the third quarter is expected to be somewhat better for both domestic and foreign orders. Indeed, 35% of the firms participating in the UBS survey are forecasting the volume of output to increase, while only 19% are predicting a fall. Work backlog should drop again overall. In addition, survey participants are expecting both domestic and export turnover to pick up momentum, with sales prices continuing to rise. This should help stabilize the overall earnings situation. The only sectors with a gloomier employment outlook are textiles, machinery, metals, and timber & furniture. Over the next three months only 3% of the industrial firms surveyed are planning to increase their headcount.

Outlook dim for majority of sectors

All sectors of Swiss industry failed to meet their expectations in the second quarter. With the exception of food, watchmaking and plastics, all sectors registered a sharp downturn in business. Nevertheless, the pace of business remained positive in all sectors except two. Food and watchmaking clearly led the pack, followed by the chemical industry. The only sectors to see somewhat negative growth were textiles and printing & graphics. Except for watchmaking, machinery and plastics, all sectors are forecasting business to improve in the next three months when compared with the last quarter's trend. The food industry is expected to see the strongest growth again, followed by chemicals and watchmaking, while plastics, machinery and paper, printing & graphics are the most pessimistic.

UBS Switzerland
Private and Corporate Clients Division

UBS business cycle indicator and Swiss GDP
(% change year-over-year)

Data (%)

Sources: seco (GDP); UBS (survey and calculations)
*preliminary official data

Swiss economic indicators
Year-on-year real change in %

Level*

1999

2000

2001F

2002F

Gross domestic product

407,4

1,5

3,4

1,6

2,1

Private consumption

242,7

2,2

2,0

1,8

1,8

Government spending

57,7

-0,4

0,2

1,0

1,0

Capital spending

84,4

1,8

6,8

2,9

4,3

Construction

39,8

-5,3

2,7

2,0

2,2

Equipment

44,6

8,8

10,3

3,7

6,0

Exports

183,9

5,9

9,5

3,6

6,2

Goods

140,3

4,4

8,9

3,7

6,2

Services

43,6

11,9

11,5

3,0

6,1

Imports

164,4

5,5

8,6

4,1

6,0

Goods

144,5

5,9

9,1

4,4

6,4

Services

19,9

2,7

4,7

2,0

3,1

Inflation

0,8

1,6

1,4

1,6

Unemployment rate in %

2,7

2,0

1,8

2,0

Number of unemployment(1000)

154

72

65

71

F: Forecast UBS Switzerland *Billions CHF at current prices, 2000

Zurich/Basel, 4 July 2001
UBS AG