Zurich/Basel, 4 December 2014 – After economic conditions for small and medium-sized enterprises (SMEs) in industry had developed below the long-term average for four months, the SME barometer gained slightly from September to October to 0.00 points from -0.37, and at the end of the period under review reached exactly the long-term average. Conditions for large companies are slightly better. From June to September, the barometer slipped into in negative territory for large industrial companies, too. In October, however, the barometer gained 0.71 points to 0.33 points, reaching the long-term average.

Essentially, the indicators incoming orders, order backlog and production contributed to the improvement of the SME barometer. However, "expectations" hampered a stronger gain. SMEs expect a lower level both in production and in incoming orders over the next few weeks until January. Incoming orders, order backlog and production contributed to the improvement among the large companies, as well. The level of incoming orders from abroad remained low for both groups in October.

Good economic conditions in the building sector
The economic conditions for construction companies were solid in the fourth quarter, although the momentum tailed off somewhat in recent months, especially among SMEs. However, the building sector continues to benefit from low interest rates and high immigration. Corporate earnings, which improved in large companies and stabilized among SMEs, are likely to have contributed to this development, too. Incoming orders in large companies continued to increase, albeit at a slower rate. This indicator deteriorated further for SMEs, but is expected to have bottomed out.

In the service sector, companies of both sizes assessed their business conditions as good in the fourth quarter. However, momentum differed slightly. In large companies momentum increased slightly, while it decreased slightly among SMEs, as did the returns. Thus, the profitability of SMEs remained unchanged compared to the previous quarter, while that of large companies improved, meaning that the profit situation for large companies has been good for two consecutive years.

Large retailers under pressure
For the first time since August 2013, the large companies assessed business conditions in the retail sector as bad. This negative assessment could stem from the rather poor profit situation in the fourth quarter. By contrast, the business situation of SMEs recovered slightly in October and was assessed as satisfactory again for the first time in four months, although the profit situation did not improve substantially.

Overall, the differences between large companies and SMEs, both in industry and in the service sector, contracted for the various indicators. One exception was the building sector, where the economic conditions for large companies were still better than those for SMEs.

UBS SME barometer

Source: KOF, UBS

Calculation of the UBS SME barometer
The UBS Industrial Barometer is based on the industry survey conducted by the KOF each month (excluding the construction industry). It is calculated as the first main component of 17 subindicators for the entire industry, divided into SMEs (up to 200 employees) and large companies (more than 200 employees). It is scaled so that its mean value is zero and its variance is 1.

 Industry

Service sector

Important
The data is seasonal adjusted. Survey responses are evaluated using a diffusion index: the result represents average of companies reporting a positive or a negative trend. It therefore does not represent a percentage rate of change.

UBS AG
 

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Veronica Weisser, UBS Chief Investment Office WM
Phone +41 44 234 50 62, veronica.weisser@ubs.com

 

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