Economy KOF survey shows slight recovery in business situation

According to a survey, the business situation for Swiss companies has recently improved slightly. However, the bad weather is causing concern.

Overall, the business situation index improved to 10.8 points from 9.9 points in June, as reported by the KOF Swiss Economic Institute at ETH Zurich on Wednesday. This value is the balance of the answers "good" minus "bad" in a survey of around 4,500 companies.

The slight improvement in the business situation was mainly due to developments in the manufacturing industry, the communiqué continued. The corresponding sub-index improved to -8.9 from -24.6 points.

This is remarkable in that the manufacturing industry in particular has been suffering from weakness for some time. "This month, it has managed to strike a blow", according to the communiqué.

Bad weather a burden

Meanwhile, the business situation deteriorated in almost all other economic sectors surveyed. This was particularly noticeable in the retail trade. However, the situation also deteriorated in wholesale, construction, financial and insurance services and slightly in other services. There was a sideways movement in the hospitality industry.

Companies in both the construction and hospitality sectors suffered from the weather, as the KOF points out. Unusually for the time of year, they complained frequently about weather-related problems.

Rising prices weakening

Expectations regarding inflation are somewhat more relaxed. While on balance companies are planning to raise their sales prices slightly more often than before, the overall price increase is significantly lower than in the winter of this year and even less than in 2022.

Companies in the manufacturing and retail sectors in particular planned to raise prices in July. By contrast, the trend towards price increases in the hospitality industry is easing significantly and slightly in the other services sector. A scenario of sharply rising service prices thus appears to have become less likely, summarizes the KOF.

Looking ahead to the next 12 months, the companies surveyed continue to expect consumer price inflation of 1.6% on average. Over the next five years, they expect inflation to be below 2 percent and thus below the 2 percent threshold that the Swiss National Bank (SNB) defines as the upper limit for price stability.