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Growth in Swiss industry eases.

Media Releases Switzerland

The second half of 2000 saw a gradual slowing of the Swiss industry's expansion. According to the latest UBS survey, the easing in momentum is likely to continue in the first months of 2001. Despite the slowdown, however, growth should continue at a good level.

Having got off to strong start in 2000, growth was slowing in the Swiss industry during the second half of the year. This trend is likely to continue in the first quarter of 2001, as the UBS December survey of approximately 300 industrial companies shows. This quarterly survey, which has been conducted since 1975, has proven to be a reliable indicator of short-term trends in the Swiss economy. The latest survey suggests very strongly, however, that the economy will remain buoyant. The UBS business cycle indicator, which acts as a trend barometer for GDP, indicates a growth rate of 3.1% in the final quarter 2000 and 2.6% in the first quarter 2001.

Domestic demand loses momentum
As had been forecast in September, the industrial sector moved significantly off its rapid growth pace in the October to December period. Export demand was more or less in line with the high expectations of the survey participants, but the forecasts for demand in Switzerland were not met. Overall, however, about half of those polled reported an increase in orders, production and sales compared with the prior-year period. No more than one company in six reported a decrease in any of these key items. With production still expanding, industrial plants are humming along at 90% capacity utilization. The number of persons employed is also continuing to rise. With the exception of the textile industry, all sectors had more staff on the payroll at the end of 2000 than they had a year earlier. During the October to December period alone, 30% of companies increased their headcount, while only one in eight had to reduce staff numbers. The pressure on prices has eased, and sales prices mostly remained stable. On balance, the earnings situation improved at 17% of the companies surveyed.

Foreign demand eases
Bulging order books and the continued high work backlog in the final quarter of 2000 point to continued growth going forward. According to this upbeat outlook, company forecasts for the first quarter of 2001 show a clearly positive balance of "increases" over "decreases" across the full range of indicators. Although exporters are significantly less optimistic than hitherto, they are still more confident than companies focused on the Swiss market, with the latter expecting incoming orders to grow at essentially the same rate as in the prior quarter.

Sales prices are set to rise sharply due to the high rate of capacity utilization and the increasing tightness of the labour market. Nevertheless, earnings will improve only slightly, as higher personnel costs and the rising cost of raw materials will weigh on profits. With the exception of the textile and paper industries, all sectors plan to hire more personnel in the first quarter of 2001.

Highly diversified picture across sectors
With the exception of chemicals/pharmaceuticals, watchmaking, and timber & furniture, all sectors experienced a distinct slowdown in business growth in the final months of 2000. Bringing up the rear on a cross-sector comparison were once again the industrial sectors of textiles and paper. Alone amongst the sectors, paper reported business down compared to the prior year. For the first quarter of this year, textile manufacturers are forecasting orders, production and sales to be below average, while the paper industry is expecting demand to pick up. Scepticism is being voiced in the metals and electrical engineering sectors, which are predicting a downturn in foreign demand. The export-oriented sectors of watchmaking and chemicals/pharmaceuticals are still the most confident. In addition, a relatively dynamic trend is expected in the food, paper, and construction sectors, all of which are focused chiefly on the Swiss market.

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

Data (%)

Zurich / Basel, 2 February 2001