UBS barometer moving sideways
Following a dip in June, the UBS SME Barometer stabilized in July. The barometer tracks business activity for small and medium-sized enterprises (SMEs). For some time, business has not being going quite as well for industrial SMEs as their larger counterparts. This is in contrast to the service sector, where SMEs sometimes do better than large companies.
Zurich/Basel, 5 September 2013 – The barometer improved in July compared to the previous month. It is calculated on the basis of the results of the KOF survey of industrial companies (KOF is the Swiss economic research institute at the Institute of Technology in Zurich, the ETH). Large companies saw a healthy 0.36 point rise in July, while SMEs were only up 0.04 points. The barometer lies significantly below the long-term average for both SMEs and large companies, and has been trending sideways since February. This supports our assessment of slow and steady economic growth in Switzerland, which, we expect to be 0.9% for 2013 as a whole.
The picture for service companies is somewhat less consistent than for industrial firms – across the board, SMEs do not fare worse than large companies. In terms of earnings, however, they underperformed large companies in the last three months, although this is not a new trend. The earnings position of SMEs in the service sector has lagged that of large companies since 2006. While most large companies viewed their level of employment as exactly right in the second quarter, their expectation for the third quarter is that they will tend to have too many employees. SMEs have considered their level of employment to be too high since the third quarter of 2011.
Weaker momentum for SMEs in the building sector
SMEs in the building sector have seen a significant downturn in momentum. Their business situation has deteriorated significantly in the past three months, with the backlog of orders rated too low again for the first time since 2Q 2010. In contrast, large companies continue to have full order books and are even reporting a slight improvement in their business situation. The price war seems to have intensified again to some extent, since both large companies and SMEs again expect prices to decline. The positive trend is unbroken in the case of architecture and engineering firms. Their assessment of the business situation, whether they were large companies or SMEs, rose to a record level. Price pressure also plays a major role in this sector, however, with large companies more severely affected than SMEs by a marginal amount.
Regardless of their size, companies in the wholesale trade are faced with weaker demand and earnings in comparison with the previous quarter. Most companies nevertheless still consider the business situation good. This contrasts with companies in the retail sector, which rated their business situation as poor. This pessimistic view also affects the level of employment. Both SMEs and large companies assessed it as too high.
Will large companies overcome the crisis in tourism soon?
For the first time in two years, large companies engaged in tourism rate their business situation as good. Earnings and revenue have stabilized, while the level of employment is no longer regarded as too high. It nonetheless still looks gloomy for SMEs in the tourism industry, where the business situation has deteriorated further. Generally speaking, however, the tourism sector does seem to be recovering somewhat in terms of overnight stays. In the first half of the year, 1.2% more guests stayed overnight in Switzerland than a year ago, with foreign guests contributing more to this growth.
UBS SME barometer
Caesar Lack, UBS CIO Wealth Management Research, Tel. +41-44-234 44 13
Sibille Duss, UBS CIO Wealth Management Research, Tel. +41-44-235 69 54
UBS Outlook Switzerland: www.ubs.com/research
UBS publications and forecasts for Switzerland: www.ubs.com/economicresearch