The latest PMI survey points to a renewed contraction in economic activity in July. At 48.7 the headline index was 1.3 points short of its unrevised June reading and back below the 50 expansion threshold for the sixth time in the last seven months.
Actual output performed well, the sub-index rising 0.7 points to 55.5, its strongest level since last December. However, the orders backlog dropped 2.6 points to 48.5, its first sub-50 posting in three months and at 41.6, employment was only unchanged from June's near-record low. Otherwise, quantity of purchases (52.5 after 50.3) moved higher but stocks of purchases (46.6 after 49.5) continued to be unwound aggressively.
There was also no improvement in the prices picture with input costs (40.2 after 43.2) again declining sharply and at their fastest pace since April.
Overall today's results are disappointing. Hopes that the economy is adjusting to the shock appreciation of the local currency in January should not be undermined. However, recovery may take rather longer than originally expected and deflation pressures remain a real problem for the SNB.
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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