Economic activity continued to contract last month according to the new SVME PMI survey. At 47 .9 the headline index was below the 50 growth threshold for a third consecutive month but at least March saw a modest 0.6 point gain versus February which suggests that the rate of deterioration may have peaked.
In fact the output sub-index gained 2.5 points to 49.8, essentially signalling a period of stagnation following a sizeable decline in mid-quarter. Backlogs, up 0.4 points at 48.0, also fell more slowly as did both the quantity of purchases (up 5.7 points at 46.8) and stocks of purchases (up 0.7 points at 45.8). However, employment continued to struggle and a 1.8 point drop here saw the lowest level since October 2009.
Inflation news was again extremely weak and although the prices gauge rose more than 13 points, at 26.3 the message was that purchase costs were down very sharply on the month.
Today's survey suggests that the economy is starting to deal with January's shock change in the SNB's FX policy. The local currency is well off the highs seen immediately after the central bank abandoned its minimum target floor but remains uncomfortably strong. First quarter real GDP most likely contracted and the second quarter could see another fall but so far the economy looks to be faring relatively well in the face of severe headwinds.
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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