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Cross-sector picture of Swiss economy shows robust health
For most sectors of the Swiss economy, 2004 was a far better year than had been expected, with sales and earnings improving markedly. Businesses are also confident about the prospects for this year. The pharmaceuticals industry was the clear sector leader in 2004 and remains so in 2005. These are the results of a broad-based survey by UBS of 4,500 companies in 27 main sectors and 95 sub-sectors of the economy.
The optimism for 2004 that companies expressed a year ago was more than just wishful thinking. According to the UBS survey, sales in no less than 20 of the 27 sectors covered actually exceeded expectations, most spectacularly in the watchmaking, pharmaceuticals, metals, building materials and chemicals industries, while disappointing results were few and far between. Parallel with this development, companies were also positively surprised by their earnings performance, with the watchmaking industry and the whole of the health sector standing out from the rest. Insurance and the retail trade suffered the main disappointments, but they too finished the year on the positive side.
Pharmaceuticals, financial services and capital goods the sales leaders in 2004
In stark contrast to 2003, all sectors reported positive sales trends last year. The sectors to enjoy the strongest boost to demand in 2004 were capital goods and financial services, as well as chemicals, watches and, topping the list, pharmaceuticals. Logistics, retail and parts of the construction industry reported a significantly more lacklustre sales trend on average. After two years of meagre pickings, profitability improved in the vast majority of the sectors covered by the UBS survey. The most impressive turnaround versus 2003 was achieved in the watchmaking, chemicals, metals and tourist industries, where earnings swung back nicely into plus after suffering a disturbing decline in the previous period. In line with their sales performance, the pharmaceutical companies reported the strongest increases in earnings, while only the construction industry and logistics companies continued to see a negative earnings trend.
Business momentum only slightly slower in 2005
The companies surveyed assume realistically that the main thrust of the upswing in 2005 will gradually ebb and that there is some uncertainty as to the robustness of the global economy. They therefore expect momentum to ease somewhat in 2005, but remain positive. It is precisely in those sectors that expanded most vigorously in 2004 that sales and business volumes will lose momentum. The pharmaceuticals sector should nevertheless retain the lead in 2005 as well. Other sectors with ambitious expectations are watchmaking, insurance and telecommunications. The construction industry along with architecture and engineering are the only sectors forecasting slightly lower volumes. Earnings look like normalizing in a similar way. Taking the average from all sectors, the earnings forecasts from the UBS survey point to a further improvement, although the pace will be slower than in 2004. The most optimistic respondents here were the watchmakers, ahead of telecoms, pharmaceuticals and insurance. Health and social services, construction and architecture and engineering, on the other hand, foresee a slight deterioration. The pressure on prices is only gradually subsiding.
Employment growth still modest
The period of reductions in headcount came to an end in 2004, but companies expect the improvement in the level of employment to be only gradual. On the positive side, however, there are at least no plans for major staff reductions in 2005 except in the tourist industry. The pharmaceuticals companies are likely to lead the field again as a magnet for job hunters. Overall, however, the hitherto strongly divergent recruitment trends across individual sectors of the economy show clear signs of converging in 2005.
Advantage to the big companies
Analysis of the UBS survey by company size reveals clear differences both in companies' assessments of 2004 and in their expectations for 2005. The criteria sales and earnings, in particular, show an unambiguous trend in favour of large companies in both years. The smallest of the small and mid-sized businesses also reported higher sales and at least stable earnings, but the increases reported become more numerous the larger the company. This is partially because large companies are more heavily engaged in the dynamic export industry, though the pressure on prices was also above the average in the export markets. At the same time, they were the most successful in controlling costs, thanks to rationalization or outsourcing of production.
Zurich / Basel, 10 January 2005
Dr. Daniel Kalt, Head of Swiss Economic Research
Tel. +41 1 234 25 60
Karin Schefer, Swiss Economic Research
Tel. +41 1 234 43 94