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Swiss Industries with Varying Degrees of Medium-Term Potential
Credit Suisse Publishes its Sector Handbook 2012Credit Suisse today published its Sector Handbook 2012. As well as assessing the current state of the Swiss economy, the study examines the medium-term potential of the key branches of the economy using Credit Suisse's revised opportunity-risk evaluation profile. Healthcare-related sectors are benefiting considerably from demographic change, and the economists at Credit Suisse therefore believe that these sectors show great promise for the future. Both the pharmaceutical industry and the healthcare system but also the medical technology and social services industries are profiting by this trend. The future will be most challenging for structurally weak sectors such as printing and publishing, metalworking, and textiles and clothing. Due to the challenging business climate, structural strengths and weaknesses will gain in significance in 2012. The Credit Suisse economists are anticipating a considerable slowdown in the economy this year, although it should be possible to prevent a global recession. This trend will affect the individual sectors in different ways.
2011 was a turbulent year for the Swiss economy. The high level of dynamism at the start of last year and the optimism this created were soon replaced by an increasing amount of uncertainty. The continuing debt problems of numerous western countries in particular made the headlines in the second half of the year.
Mixed Expectations for 2012
The strong Swiss franc was one of the dominant issues of the past year. However, not all sectors have been affected to the same extent by the strong franc. The greatest effects were apparent in the hotel and catering sector and in retailing. In industry, the (albeit flagging) economic dynamism mostly outweighed the effects of the strong franc in 2011, although companies with a high level of exports in particular saw their margins shrink. The various sectors have differing expectations for 2012. Whereas the mechanical and electrical engineering (MEM) industries will be hit by the slowdown in Europe and the pharmaceutical sector is still facing the expiry of patent protection on high-selling medicines, the healthcare and social services sectors and the watchmaking industry will again hardly notice any crisis in 2012. The watchmaking industry in particular is also expected to grow considerably this year, although it is unlikely to match last year's growth rates. As interest rates are set to remain low, the construction sector can look forward to another good year in terms of volume, which should have a positive effect on the order situation for engineers' offices.
Structural Factors Gaining in Significance in the Medium Term
While the economic climate will play a key role in the various sectors in the short term, structural influences will be decisive for a sector's development in the medium term. Demographic change, technological advances and the intensifying shortage of resources are important factors affecting the prosperity of an economic sector. While these and other trends are generating strong growth in certain sectors, they may increasingly cause problems for companies in other branches of the economy. Against this backdrop, each year Credit Suisse Economic Research models the medium-term opportunities and risks facing the various sectors in Switzerland.
Healthcare Sectors Have the Most Positive Outlook
Demographic change presents great opportunities for the Swiss economy. Population growth, progressive aging and an increase in chronic illnesses are contributing to the continual rise in demand for medicines, medical treatments and care services in Switzerland. Population growth and rising prosperity in the emerging nations are adding a great deal of momentum. Despite certain risk factors, the Credit Suisse economists therefore consider the pharmaceutical industry and the healthcare sector to have the best perspectives in the medium term (ranked 1 and 2). The social services (position 4) and medical technology (position 8) sectors are also expected to gain as a result of this trend, with the former also benefiting from increased outsourcing of care services.
Good Perspectives for Many Services Industries
The IT sector and the corporate services field also have a very good opportunity-risk ratio. They are benefiting from the increasing complexity and networking of business and society, as well as from the growing pressure to standardize and optimize processes. When looking for ways to optimize costs, more and more companies are choosing to outsource services with potential for standardization to specialist external IT providers. The increasing division of labor and the rise in professionalization have proved advantageous for the real estate sector.
Construction Industry Struggling with Structural Problems
Despite the high demand fueled by the ongoing property boom, the construction sector only achieved an average opportunity-risk rating. Fierce competition is driving down construction prices. In many areas of both the main and ancillary construction trades, productivity is suffering from the trend towards volume business with comparatively low margins. The opportunities will therefore not be able to offset the risks.
From the range of industries, the Credit Suisse economists consider that the sectors with an above-average opportunity-risk ratio – in addition to the aforementioned top-ranking pharmaceutical and medical technology sectors and the outstandingly positioned watchmaking industry – will be those with the potential to benefit from the worsening shortage of resources, the associated trend toward energy efficiency, and the increased awareness of sustainability issues. These include the electrical engineering, measuring and control instruments and wood industries. There is also a whole host of industry sectors in which the risks clearly outweigh the opportunities – including the printing and publishing sector, the metal industries, and the textiles and clothing industry. They are primarily suffering from strong foreign competition and the resulting pressure on prices.
The New Opportunity-Risk Profile – Further Optimization of a Proven Concept
The Credit Suisse economists have used the changeover of numerous official economic statistics to the new system of economic sectors (NOGA 2008) as an opportunity to further optimize the existing opportunity-risk profile created in 2006. The number of basic indicators has now been reduced from 19 to 14, which means that only statistics that are available for practically all industries are used. The new profile also attributes significantly more importance to the future by giving a greater weighting to forecasts and expert assessments. This procedure ensures that trends influencing demand in the medium to long term receive more attention, and that structural influences are now included more systematically in the final result.