Very Good Prospects for Swiss Economy, Labour Market

KOF Economic Barometer

                Although the COVID-19 pandemic is not over yet, the Swiss economy is already back on track after long time of stagnation. The country’s economy is expected to rebound from the crisis even stronger than before. Very optimistic news came with KOF indicators on economy, labour market and PMI index. The KOF Economic Barometer which shows the direction of GDP growth for the Swiss economy, comparing it to the same quarter a year earlier, went up by 15 points in April to 134 points. The barometer shows expected performance of the economy in around next half year. The 134 points beat the highest level of 131 recorded in March 2010, when Switzerland was recovering from the financial crisis.

Much Improvement despite low EURCHF exchange rate

                The economic situation is significantly improved comparing to 2020, when GDP went down due to the pandemic and lockdown, while also low EURCHF exchange rate hurt export-driven Swiss economy. Investors were eager to buy Swiss francs last year, boosting its price, as the currency is considered one of best safe-haven asset. After a standstill of Swiss economy during the first wave of the pandemic, it is now tipped to flourish as KOF Barometer is at a historical high. KOF’s experts claim it is due to great manufacturing data and said that “unless the virus takes another leap, economic development is likely to get a strong boost in the near future.” Favourable international demand is triggering better manufacturing, but also “the outlook for other services, financial and insurance services and consumer demand also brightens considerably.” One of the rebounding fastest sector is construction. Only the hotel and restaurant industries are still experiencing a slowdown as their operations have been limited for a long period now.

Record PMI

                Not only KOF’s Economic Barometer is now at record high, but also Swiss Purchasing Managers Index PMI indicator hit the highest level ever, since its records began in 1995. PMI hit 69.5 points. “Swiss manufacturing is bouncing back so quickly that signs of scarcity are widespread, to such an extent that this is even causing prices to rise. That said, the process of restoring capacity is making rather sluggish progress amidst signs of a certain scepticism on the part of businesses regarding the longevity of the boom,” – Credit Suisse economist Claude Maurer commented – “The recovery in Swiss manufacturing is broad-based and will likely remain in place for the foreseeable future in light of the positive order situation,” – Maurer added. Additionally, order backlog, suppliers’ delivery times and purchase prices reading went to highest levels. The output was at second-highest reading after July 2006. As the global economy is slowly recovering, the Swiss one is benefitting from that with export being at its core.

Labour Market Doing Better

                KOF experts also pointed out that “the outlook for the Swiss labour market is improving significantly” with its Employment Indicator rising sharply. It is now just below its long-term average reading. Better results are triggered by more optimistic employment prospects as “for the first time since the beginning of the Covid crisis, there are more firms that plan to increase their headcount over the next three months than those that expect to cut staff.” The unemployment level is still below the point before pandemic, but forecasts are positive, especially in insurance, construction, wholesale industries. No job vacancies are expected soon in hotel and restaurant sectors only, which might be worrying news for potential cross-border workers who often find posts in these industries.