Swiss industry expanded at a respectable and faster than expected pace in December. At 54.0, the sector PMI was up nearly 2 points versus its November reading and reversed more than half of that month's decline.
Output (56.3) rose sharply and significantly more quickly than in mid-quarter and a jump in backlogs (54.9) promises more to come this month. Quantity of purchases (51.9) returned to positive growth territory and a further lengthening of supplier delivery times (56.8) similarly hinted at a good month for economic activity. Even so, employment (51.1) saw its weakest performance in three months and purchase prices (49.3) fell for the first time since May.
The December results yield an average fourth quarter PMI of 53.8, a 1.3 point increase compared with the third quarter (when real GDP grew at a surprisingly robust 0.6 percent quarterly rate) and just a tick short of its long-run average. Accordingly, the signs are that the Swiss economy closed out 2014 on a reasonably firm footing. However, this does not mean that the SNB will be any less determined to protect its CHF1.20 target floor versus the euro.
The SVME Purchasing Managers Index (PMI) tracks trends in Swiss manufacturing. Around 200 Swiss industrial companies are surveyed.
The PMI is very sensitive to the business cycle and tends to match growth or decline in the economy as a whole. To construct the PMI the Swiss Association of Purchasing and Materials Management conducts monthly surveys of purchasing executives on their performance in the current month versus the previous period. Because the amount of materials ordered by purchasing managers parallels the level of manufacturing production, the PMI is a gauge of production growth. The results are indexed with a centerline of 50; values above 50 indicate expectations of expansion and values below 50 indicate expectations of contraction for the manufacturing sector.
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