CH: KOF Swiss Leading Indicator

Mon Aug 31 02:00:00 CDT 2015

Consensus Actual Previous Revised
Level 100.0% 100.7% 99.8% 100.4%

The KOF leading economic indicator posted a 0.3 point gain from a higher revised July outturn to 100.7 in August. This put the index nearly 11 points above its April low and 0.7 points firmer than its long-run average.

Positive signals from banking and manufacturing contrasted with a modest decline in construction while domestic consumption and the international environment had a broadly neutral impact.

Although August's headline increase was too small to be statistically significant, consolidation of July's 10.6 point jump is reassuring. Indeed, it suggests, in line with last week's surprisingly firm second quarter national accounts, that the economy is over the worst and second half growth should at least be on the right side of zero. Nonetheless, deflation is still a major threat and so long as this remains the case, the recovery is likely to stay patchy and lacking any real momentum.

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.