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UBS SME barometer falls below average

Zurich/Basel Media Releases Switzerland

After a bright spell among industrials, conditions worsened again. Barometers for SMEs as well as for large companies were slightly below their long-term averages again in July. By contrast, service companies still rated business conditions as good due to high demand and improved profit figures.

Zurich/Basel, 4 September 2014 – After the economic environment improved greatly for both large companies and small and medium-sized enterprises (SMEs) in the second quarter, the industrial enterprises suffered a decline again at the beginning of the third quarter. In July, the indices of both large enterprises (–0.02 points) and that of SMEs (–0.09 points) were slightly below the long-term average of zero points. Between April and July the barometer deteriorated by 0.42 points for both SMEs and large companies. Poorer economic conditions drove the decline for company classes, especially regarding production and incoming orders indicators.

Industrial companies struggling with falling returns

In addition to falling production and incoming orders, industrial companies suffered a further drop in earnings, although the situation was more strained for large companies than for SMEs. Despite the weakening of most indicators, SMEs and large companies still rated general business conditions as satisfactory. However, this represents a deterioration for large companies, since they had still rated conditions as good at the beginning of the year. The economic circumstances had been stable for SMEs for several months. Previously, SMEs had regarded the business conditions as poor for two consecutive years.

Things are better for the more domestically-oriented service companies, which continue to rate the general business conditions as good at the beginning of the quarter, with large companies performing slightly worse than SMEs. In addition to the continuing high domestic demand, the profit situation may have promoted the agreeable course of business among service companies. While this has improved continuously for large companies since early 2013, SMEs first began posting profits again at the beginning of the third quarter of 2014.

Weakening momentum in the building sector

The more domestically-oriented building sector is still benefiting from low interest rates and immigration, though uncertainties have increased recently for the companies. While dynamics tailed off noticeably, the large companies and SME alike still rate their business conditions as good. However, construction companies still consider their profit figures to be poor, even given the recent low-level improvement.

SMEs in the retail sector in particular are struggling with falling returns, while large retailers' numbers stabilized at the previous quarter's level. Although likewise domestically oriented, the retail trade continues to lose many customers to neighboring countries or e-commerce owing to the strong Swiss franc. In general, large retail companies appear to be experiencing fewer difficulties with the current economic circumstances than their SME counterparts. The large companies still anticipate rising sales for the fourth quarter, which could also explain the positive assessment of general business conditions. By comparison, the SMEs posted falling earnings and also rated conditions as poor.

Tourism suffering

The tourism industry is also facing similar problems as the retail sector. The strong domestic currency is still squeezing the number of foreign guests, while Swiss holidaymakers are flocking abroad. Thus sales of both SMEs and large companies alike fell in the third quarter. Earnings were also lower than in the prior quarter. This negative trend of the two indicators dampened business conditions in the tourism industry,  are still rated as poor.

The divide in the Swiss economy is generally not between large companies and SMEs, but between export-oriented and domestically-oriented sectors. While the domestically-oriented sectors such as construction are able to hold their own in the current economic environment, export-oriented industries are still suffering from weak foreign demand.



Media contact

Sibille Duss, UBS Chief Investment Office WM
Phone +41 44 235 69 54,

Veronica Weisser, UBS Chief Investment Office WM
Phone +41 44 234 50 62,


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