The recovery forges ahead
Having rapidly overcome the crisis, Swiss companies now expect growth to tail off slightly in the current quarter. However, the situation varies depending on the size of the company and the sector of operation. Thus, for example, SMEs in the building and construction sector are benefiting more from the construction boom in Switzerland than larger companies. In the service sector, by contrast, SMEs had a harder time in the last quarter of 2010 than large enterprises.
On average, Swiss companies were able to stabilize their sales prices, earnings and cash flows in the last quarter of 2010. The employment rate and sales were up slightly in comparison with the same quarter in the previous year. The business climate, which summarizes key indicators, improved for large companies and SMEs alike, both of which expect this indicator to develop positively this quarter.
SMEs in the manufacturing sector experienced a less severe slide in sales prices last quarter than large companies. However, SMEs fared worse on most other indicators. Large companies were able to increase overall sales more significantly. A similar picture emerged in terms of profit, where large companies were also able to report a slightly greater improvement. In the areas of employment and cash flow, by contrast, the two business groups only differed only marginally.
In the service sector, too, SMEs reported less impressive results for all indicators in 4Q 2010 than companies with more than 250 employees. However, both business groups were able to improve sales, profit and cash flow and expect further gains for all three figures in the current quarter. In 1Q 2011, the SMEs surveyed even expect a greater increase in sales prices than large companies.
SMEs stabilize sales in the tourism industry
In the last quarter of 2010, SMEs in the tourism industry succeeded in stabilizing their sales at the previous year's level and, in contrast to large companies, are even expecting the situation to improve in the current quarter. SMEs also fared better in terms of cash flow and profit. Companies with more than 250 employees suffered declining sales in the last quarter of 2010 and expect the situation regarding this indicator to deteriorate further in the current quarter.
According to the survey results, both business groups increased their prices marginally in the last quarter, while employment stabilized at the previous year's level. However, only large companies anticipate a slight rise in the number of employees in the current quarter.
In the building and construction sector, small- and medium-size enterprises would appear to have weathered the crisis better and are benefiting to a greater extent from the Swiss construction boom than large companies. Thus they were able to increase sales slightly in 4Q 2010, while in the case of large companies, sales stagnated at the level of the previous year. Although SMEs experienced a slump in sales prices, the employment indicator was up in comparison with the previous year's level and companies expect the situation to stabilize in the current quarter. Large companies expect their headcount to fall slightly during the same period.
Better sales figures in the retail sector
Sales improved in the retail sector in the last quarter, and employment also saw a slight increase. Large companies and SMEs alike experienced a drop in sales prices, although this drop was less pronounced for SMEs. In 1Q 2011, SMEs in the retail sector expect this indicator to stabilize, while large companies expect considerable deterioration. Profit and cash flow are expected to decline during the current quarter; the slump is set to be significantly worse for large companies than for SMEs.
Investment activity over the last year remained on par with the long-term average in almost half of the companies surveyed in the industrial and service sectors. A quarter of the industrial enterprises and a third of the service companies even increased their investment activity during the period under review. For the current year, most of the companies are not planning any further expansion. Some 20 percent of the industrial and service enterprises even expect their investment activity to fall in 2011.
The business climate is calculated on the basis of the survey results for output, incoming orders and revenue in the manufacturing sector. Data on cash flow and on an industry-specific level have been collected since the first quarter of 2009.
Notes: Previous quarter trends are extrapolated actual results (grey bars). Current quarter trends are companies' expectations (shaded bar). The respondents were asked about the change compared to the same quarter in the previous year. The collected data is evaluated using a diffusion index. The results can range between -100 and +100, with results at or around zero [-5;5] representing stagnation, results up to -50 (+50) representing a deterioration (improvement) and results below -50 (above +50) representing a major deterioration (improvement). The data do not represent a percentage change in the parameter.
Dr. Daniel Kalt, Chef Economist Switzerland, UBS
Tel. +41-44-234 25 60
Dr. Caesar Lack, UBS Research Switzerland
Tel. +41-44-234 44 13
Sibille Duss, UBS Research Switzerland
Tel. +41-44-235 69 54
The Schweizerische Gewerbeverband sgv (sgv Swiss Industry and Trade Association) is the umbrella organization for small and medium-sized enterprises. It was founded in 1879 and is now the largest business association in Switzerland. The sgv represents the interests of some 300,000 small and medium-sized enterprises. Most of these companies are members of approximately 255 industry and professional associations and of cantonal industry and trade associations, which are organized on a multi-sector basis.