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UBS outlook update 1st quarter 2008

Zurich / Basel Media Releases Switzerland

Economy has passed its peak - prices on the rise Swiss industry once again had little reason to complain in the fourth quarter of 2007, and the participants in UBS's latest survey appear confident for the current quarter as well.

As part of its quarterly sector survey at the beginning of the year, UBS asked around 410 Swiss industrial companies about their assessment of the fourth quarter of 2007 and expectations for the first quarter of 2008. Their responses reveal that the economy remains robust.

Positive picture across all Swiss sectors
Overall, 52% of survey participants reported that new orders had risen in the fourth quarter and 56% reported that total sales had increased. Swiss manufacturers benefited in particular from the strong demand from export markets. Both headcount and production increased. Capacity utilization contracted slightly, from a record-high 91.4% in the third quarter to 90.7% in the fourth quarter of 2007, but order books grew in all sectors. The watchmaking industry, in particular, had another excellent quarter. Among the sectors polled by UBS, it had the strongest earnings and the highest proportion of companies with growing exports and increased headcount.

Good expectations for the first quarter
The UBS Business Cycle Indicator, calculated on the basis of the survey results, shows that the Swiss economy should remain on solid footing until mid-year as a result of growing orders and order backlogs along with rising production and employment. However, the pace of growth is likely to decrease somewhat. According to sector representatives, new orders from Switzerland and abroad, earnings, production and headcount should grow again in the first quarter, but they will not keep up with the strong trend of the past two years. On a sector level, the food and paper industries stand out with very positive expectations for production, orders and sales. The wood-processing companies and plastics producers are more sceptical in their outlook.

Prices on the rise
There is broad consensus among the survey participants that prices will rise this quarter. The only exceptions were the printing and graphics industry and electronics, which even expect prices to fall.

Daniel Kalt, Head of Economic & Swiss Research
Tel. +41 44 234 25 60

Karla Duss, Economic & Swiss Research
Tel. +41 44 234 21 19