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UBS SME barometer: Industry turnaround confirmed
October was a good month for industry. In particular, large companies report smooth going. For the first time since February of the current year, the barometer for large companies registered a positive value. Small and medium-sized enterprises (SMEs) don't have it quite as good. Although the SME barometer also improved somewhat, it is still in negative territory.
Zurich/Basel, 5 December 2013 – For the first time since February of the current year, the barometer for large companies moved into positive territory in October. The barometer rose to 0.11 points from –0.42 points in the previous month. The improvement for SMEs was somewhat less pronounced. The SME barometer merely rose to –0.21 points from –0.38. Thus, SMEs surrendered their slight lead from September over the large companies.
Large industrial companies boost production
While SMEs curtailed their production in recent months, large companies increased theirs. However, when evaluating headcount and business conditions, there are no differences between SMEs and large companies. Both still classify business conditions as poor, even while the trend of recent months exhibits a steady recovery. Commercial relief can be seen above all in incoming orders; these have risen for most large companies, and signs of a recovery are also visible for SMEs.
Construction is a bright spot among industry sectors. Nevertheless in construction SMEs also tended to fare worse than large companies. The difference is notable primarily in the backlog of orders and in business conditions. When it comes to pricing behavior, SMEs are assuming a smaller decline in construction than large companies are. With respect to engineering and architecture firms, both SMEs and large companies continue to assess the economic situation as very good. The number of large companies classifying their business conditions as good jumped again in the last three months. The comfortable economic circumstances are also reflected in profit. In contrast to SMEs in construction, the profit for most small and medium-sized engineering and architecture firms has improved in the past three months.
No uniform picture in the service sector
The service sector presents no uniform trend. In the retail trade, SMEs are reporting a decline in profits, while profits for most large companies improved. Surprisingly, in the general assessment of business conditions, just the opposite appearance arises – here SMEs are ahead by a nose. In wholesale trade, especially demand development for the two corporate groups is diverging. While SMEs are observing growing demand again for the first time in two years, more large companies than three months ago are again expecting a decline.
Conditions for tourism-based companies remains difficult even though overnight stays in recent months have seen a slight year-on-year increase. The differences between SMEs and large companies have become somewhat smaller in recent months, because circumstances for large companies have tended to align with the inferior position of SMEs. Both corporate groups still assessed business conditions as poor, the employment level as too high and profitability as stretched.
Slow recovery in industry, solid service providers
The survey results indicate that both SMEs and large companies in industry have bottomed out. This accords with UBS's evaluations projecting that recovery of the world economy will gradually lead to an increasing demand for Swiss goods and thus could propel industry further. Service sector companies continue to assess business conditions as good. Also for this sector, UBS assumes solid domestic demand in the coming months due to continuing immigration and low interest rates.
UBS SME barometer
- Caesar Lack, UBS CIO Wealth Management Research, Tel. +41-44-234 44 13
- Sibille Duss, UBS CIO Wealth Management Research, Tel. +41-44-235 69 54
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research