CH: KOF Swiss Leading Indicator

Mon Mar 30 02:00:00 CDT 2015

Consensus Actual Previous Revised
Level 90.0% 90.8% 90.1% 90.3%

The KOF leading economic barometer rose 0.5 points to 90.8 in March. The end of quarter gain was the first increase since December and followed a near 9 point cumulative drop in January and February prompted by the SNB's decision to abandon its minimum FX rate policy.

The modest headline recovery reflected small advances in domestic consumption, manufacturing and exports but still suggests that the Swiss economic activity will be soft in the immediate future. Indeed, production, orders and employment are all judged to have deteriorated versus February.

The signs are that the Swiss economy has started to adjust to January's shock change in SNB policy. However, with the CHF around 14 percent stronger versus the euro compared with the start of 2015 even the central bank's recently downwardly revised 1.0 percent growth forecast this year could prove too optimistic.

The KOF Economic Indicator is a composite leading indicator that aims to identify shifts in the Swiss business cycle around three months ahead of the actual event and, until the start of 2014, was based on twenty-five different economic indicators. The old version of the KOF Economic Indicator used the previous year's GDP growth rate published by the Swiss State Secretariat for Economic Affairs (SECO) as a yardstick. The revised measure still incorporates SECO data; however, KOF has changed over to month-on-month changes in GDP which are generated via statistical methods. This reference series is not about exact GDP figures but about the direction and strength of the economic trend. The new objective of the Barometer is the same as the old objective: achieving maximum possible accuracy in predicting the Swiss business cycle.

The indicator measures overall economic activity through a qualitative business survey about developments in the recent past, the current situation and expectations for the next three to six months. Getting an accurate handle on where the economy is headed is inevitably a vital element in all investment decisions and the new measure uses some 219 variables in order to do just that. The set of variables will be reviewed every autumn.

Survey questions relate to production, orders and stocks of finished goods. The Swiss Institute for Business Cycle Research (KOF) publishes this indicator monthly.