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Variable outlook for Swiss companies as economy slows, says Credit Suisse

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Swiss companies are facing major uncertainties in 2009, according to research by Credit Suisse.

Swiss companies are facing major uncertainties in 2009, according to research by Credit Suisse.

Whereas last year the economic research team at Credit Suisse had only expected two sectors to experience a substantial decline in sales, they now expect ten mainly industrial sectors to suffer a setback in 2009.

With the exception of healthcare, whose development is largely unaffected by the business cycle, the latest Sector Handbook from Credit Suisse suggests that not a single sector can expect to see sales rise significantly in the year ahead, according to an evaluation model that largely factors out cyclical influences.

The boom of the last three years brought burgeoning sales for almost all sectors and thus tended to obscure their structural problems. Credit Suisse says this makes the current situation all the more serious.

It says in 2009 the repercussions of the financial crisis will spread to large areas of the real economy. In the medium-term, persistently low interest rates, combined with extensive fiscal packages and a stabilization of the financial sector should contribute to a gradual recovery of the economy.

According to the Credit Suisse economists, the export-oriented sectors will be especially hard hit by the current growth slowdown, firstly because major export markets have already slid into recession and secondly because the Swiss franc appreciates at times of uncertainty.

Several segments of Switzerland’s mechanical engineering industry – especially textile machinery and automotive components – are being hit by the global downturn in capital spending.

Credit Suisse regards the food industry’s prospects as relatively bright owing to solid domestic consumption and strong positioning abroad. This sector coped successfully with the boom in agricultural producer prices in 2008 and has become a major exporter.

The chemical industry should also perform relatively well as it is less dependent on cyclical trends in the economy as a whole.

Turning to the service sector, the financial industry is now in a restructuring phase that will most likely also impact feeder segments such as corporate services and IT. These segments were among the fastest-growing ones during the boom. As private consumption is still growing, consumer-related industries such as retail trade and hotels and catering stand to do relatively well.

After three years of strong growth, the economic research team at Credit Suisse expects employment to decline by 0.4 per cent or 13,750 full-time equivalent posts. This would imply a rise in unemployment from 2.6 per cent in 2008 to about 3.4 per cent.

The post and telecommunications sector and the printing and publishing industry look set to suffer the biggest declines in percentage terms. Providers of financial services are likely to shed some 3,000 jobs, whereas over 2,000 new positions are expected to be created in the watchmaking/precision instruments segment and roughly as many again in healthcare.

According to Credit Suisse’s model for assessing risks and opportunities, the leaders are the chemical industry, watchmakers, and manufacturers of precision instruments (especially medical technology). These sectors are technology leaders that have contributed greatly to the successful export track record of Swiss-made products.

Next in line after these top sectors are healthcare and corporate consultants. While the former enjoys steadily rising demand on the back of an aging population, the latter are benefiting from the growing trend toward division of labour in the manufacturing and service sectors. For the banks, too, the medium-term outlook for wealth management in particular is promising.

At the other end of the scale come sectors with structural problems on the supply side and those whose existence is jeopardized by mega trends – such as technological progress or globalization. In particular, these include agriculture, hotels and catering, textiles and apparel, printing and publishing, and the paper industry, says Credit Suisse.

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