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UBS SME barometer: Sluggish recovery for industrial companies
Survey results continue to indicate slow recovery in industry. Large companies have the lead here. The service sector shows a more differentiated picture.
The SME barometer, calculated on the basis of the results of the KOF survey of industrial companies, has shown a mild recovery for both small and mid-sized enterprises (SMEs) and large companies. While the index for large companies approached the zero mark at –0.07, indicating a move towards stability, business conditions among SMEs remain somewhat more negative. Nonetheless, SMEs did improve their business conditions to –0.4 points in April from –1.1 points in January. The current values are still below the long-term average of 0.27 points for SMEs and 0.22 points for large companies, which is indicative of a challenging economic environment for industry.
Subsiding price pressure in building sector
In the building sector, the decline in prices gradually seems to be nearing its end for both SMEs and large companies. Both business groups expect prices to stagnate in the second quarter. Although momentum is weakening in terms of orders, the building sector is still enjoys comfortable business conditions, demonstrated by the fact that both large companies and SMEs consider their business circumstances to be good. While SMEs are even creating new jobs again, large companies are somewhat more cautious in terms of their hiring policy. There is no foreseeable decline in business conditions for architectural and engineering offices. In fact, these reported a leap in demand during the spring. Both large companies and SMEs considered the business climate to be positive, although large companies lost some momentum in recent months. SMEs, however, are suffering badly as a result of the price pressure.
The indicators paint a mixed picture in the service sector. The business situation among large companies appears somewhat better than among SMEs. These have reported stagnating demand and a decline in revenue, unlike large companies, which have reported improvements in both indicators. Despite the deterioration in the business environment for SMEs, both enterprise groups assessed their business conditions in recent months as positive.
Short-lived recovery in tourism
The recovery of the tourism sector in the first quarter of 2013 proved to be unsustainable, especially among SMEs. All indicators reveal a decline among SMEs. The situation is similar among large companies. With the exception of earnings, which remained unchanged against the previous quarter, all of the indicators continued to decline. While the major differences between business groups in other sectors fall in favor of large companies for the most part, such a discrepancy was not observed in the tourism sector.
The retail sector showed considerable differences between large companies and SMEs in estimating future revenue. Large companies are much more pessimistic about the future than SMEs. This is also reflected in their assessment of the business situation, which SMEs also see more positively than large companies, although this somewhat more upbeat perspective on business conditions is not influencing the number of employees – SMEs continue to see their employee numbers as being too high. The assessment of the general economic situation was the opposite of the earnings situation in the last three months. While the income of both business groups fell over the last three months, the decline among large companies was less severe than among SMEs.