Economic activity contracted again last month and at a slightly faster pace than in January. At 47.3, the PMI was 0.9 points short of its January level and at its lowest level since October 2012. However, the outturn was much as expected and at least the latest decline was significantly smaller than seen at the start of the year.
February's headline drop reflected broad-based weakness, notably in output, where the sub-index decreased nearly 4 points to 47.3, and employment, which was off 3.3 points at 45.4. Not surprisingly, prices were also very soft; falling fully 8.3 points to a new record low of just 12.9.
Two consecutive months of the PMI in negative growth territory are likely to be followed by another sub-50 print this month as the economy continues to adjust to the loss of competitiveness prompted by the rise of the CHF. The February PMI results are consistent with those of the KOF survey released last week and strongly suggest that Swiss GDP will register its first outright contraction this quarter since the third quarter of 2011.
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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