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UBS SME barometer: SMEs stabilizing the economy

Zurich Media Releases Switzerland

Business conditions improved for small and medium-sized enterprises (SMEs) in the fourth quarter, as it has for large industrial companies. However, the barometer for large and smaller companies lies below the long-term average. Service providers still assessed their business conditions as good, despite weaker momentum.

Zurich, 3 December 2015 – The theory that SMEs are less prone to significant fluctuations in a crisis than large companies is holding up once again. This was evident both among industrial and service companies. The SME barometer improved 0.25 points between September and October to -0.71. In the same period the barometer for large industrial companies increased to -0.81 points from -1.10, but with a more downbeat assessment of the economy than SMEs. For both large companies and SMEs, the level of the barometer lies below the long-term average of 0.12 points for SMEs and 0.15 points for large companies.

Industrial companies appear to be out of their trough even though most industrial companies still rate business conditions in the fourth quarter as poor. This fell slightly with respect for both SMEs and large companies. Other indicators paint an inconsistent picture. After a brief improvement to roughly the level just after the exchange rate floor was lifted, large companies' foreign order backlog fell in October, while SMEs assessed their conditions somewhat more positively.

The construction industry past its peak
Although demand expectations for most construction companies continued rising, both SMEs and large companies are a long way from the boom in 2013. This lack of demand found an echo in the assessment of economic conditions. The slight fall in demand growth is also likely to depress employment levels slightly, so that employment levels will be higher than expected in the coming months.

A similar picture emerged in architecture and engineering for the fourth quarter. In this sector too, demand expectations fell, with no visible differences between large and smaller companies. While both SMEs and large companies rated their earnings prospect for the fourth quarter as weak, SMEs were less pessimistic. Regardless of the worse assessment by large companies for various indicators, they judged their economic situation more positively than SMEs.

Erosion of earnings for large service providers
Service companies still rated business conditions for the fourth quarter as good, but earnings were seen as substantially worse. Things look particularly gloomy for large companies, which suffer more acutely under current economic conditions. Higher margin losses among large service companies coincide with the expected decline in demand in the fourth quarter and also the anticipated development of retail prices in the first quarter. In both survey indices, large companies came off worse than SMEs.

In the retail sector, SMEs offered a worse assessment than large companies. Major retailers rated business conditions for the fourth quarter as satisfactory, whereas SMEs still evaluated their situation as poor. The latter assessment has remained stable since the minimum EURCHF exchange rate was discontinued. With respect to earnings, the expectations of SMEs are also worse than for large companies, but the downward trend slowed for companies of both sizes. Major retailers are more optimistic about the future. While they anticipate increasing sales for the first quarter of 2016, the expectations of SMEs point in the opposite direction. As companies of both sizes stated their employment levels were too high in the fourth quarter, unemployment in the retail sector is likely to increase slightly.

UBS SME barometer

Calculation of the UBS SME barometer
The UBS Industrial Barometer is based on the industry survey conducted by the KOF each month (excluding the construction industry). It is calculated as the first main component of 17 subindicators for the entire industry, divided into SMEs (up to 200 employees) and large companies (more than 200 employees). It is scaled so that its mean value is zero and its variance is 1.



The data is seasonally adjusted. Survey responses are evaluated using a diffusion index: the result represents average of companies reporting a positive or a negative trend. It therefore does not represent a percentage rate of change.


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Sibille Duss, UBS Chief Investment Office WM
Phone +41-44-235 69 54,