CH: KOF Swiss Leading Indicator

Fri May 29 02:00:00 CDT 2015

Consensus Actual Previous Revised
Level 90.0% 93.1% 89.5% 89.8%

The KOF's leading economic index posted a surprisingly strong bounce this month. At 93.1, the headline measure was up 3.3 points versus its marginally higher revised April reading to register its firmest level since January.

The recovery was driven mainly by manufacturing activity but also supported by smaller contributions from domestic consumption and construction. However, not surprisingly, exports continued to have a negative impact.

May's reading offers hope that economic activity may be starting to stabilise this quarter following a 0.2 percent contraction in total output in January-March (see today's GDP calendar entry). Nonetheless, the latest level of the indicator is still soft and, at best, points to only a modest improvement in overall economic conditions.

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.