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UBS outlook Switzerland 3rd quarter 2009 - UBS Business Cycle Indicator reaches historic low

Zurich / Basel Media Releases Switzerland

In the second quarter of 2009, the UBS Business Cycle Indicator reached a historic low. According to UBS's quarterly survey in Swiss industry, new orders, sales, earnings and production dropped, while job cuts accelerated further. Prospects for the third quarter remain dismal.

Some 750 industrial and service companies polled by UBS in June experienced a further deterioration in their business trend in the second quarter of 2009. As a result, the UBS Business Cycle Indicator, compiled from the results of the survey in the secondary sector for the second quarter, reached a historic low of -2.6. Since 1975, UBS has conducted a quarterly survey of business trends at industrial companies in Switzerland; the UBS Business Cycle Indicator is calculated using data from 1981 to today and is a reliable near-term barometer for Swiss gross domestic product (GDP). The industrial companies polled expect the situation in the third quarter to remain similar to that in the second quarter, without any further drastic deterioration nor a recovery in sight. UBS Wealth Management Research's economic forecasts for Switzerland continue to paint a gloomy picture, with a 2.8% contraction in real GDP forecasted for 2009.

Industry in the throes of recession
Swiss industrial companies saw no respite in the second quarter after a difficult start to the year. New orders, sales, earnings and production retreated again year-on-year. Job cutting accelerated and prices came under growing pressure.

Of the sectors polled, food manufacturers and the construction industry performed relatively well. The machinery, electrical engineering and metals industries, however, were hit especially hard by the crisis, with sales suffering an even sharper downturn in the second quarter than in the first. They scaled back production more than expected and the earnings situation looked even more precarious. Despite the job cuts and production cutbacks, work backlogs decreased further.

Watch industry slashes headcount
Due to the massive slump in new orders, sales, earnings and production, the watch industry made greater job cuts than any other sector in the second quarter. According to survey results, the industry expects to make even more drastic reductions in the third quarter, although the year-on-year drop in new orders, sales, and earnings should be less severe than in the previous quarter.

Slowdown in activities in the service sector
Since our first survey on business trends in the service sector, conducted in the fourth quarter of 2008, the situation of these companies has also deteriorated. At the time, they reported sales, earnings and prices on a par with the previous year, but the picture now six months later is more dismal. In the recent survey, they reported - as in the previous quarter - sliding revenue figures and dwindling profits. There are now also signs of an erosion in prices and fees, as well as staff cutbacks in some sectors.

Major retailers face an increasingly difficult environment
Major retailers are also increasingly feeling the effects of the recession. While the food and beverage segment produced slightly better figures in the second quarter, sales of textiles and other non-food articles declined. Prices in all product groups came under pressure. Wholesale trading and logistics companies also saw declining sales and earnings, falling prices and job cuts.

Service companies do not anticipate an improvement in the situation in the third quarter. According to survey results, the current trends will continue to accelerate mildly into the next quarter.


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

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

UBS publications and forecasts for Switzerland:

UBS Business Cycle Indicator and gross domestic product
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Data (in %):