At 100.4, the KOF leading economic indicator this month was little changed from August's upwardly revised 101.2 mark.
The minor dip reflected a slight worsening in domestic economic conditions that was almost offset by a marginal improvement in the global assessment. Manufacturing and construction both lost some ground compared with August while banking and household consumption were essentially stable.
September's second consecutive reading above the 100 long-run average level provides further evidence that the economy has stabilised in the wake of the SNB's shock move on FX policy at the start of the year. The latest value is nearly 15 points above the February low prompted by the central bank's abandonment of its lower exchange rate target and firm enough to suggest a moderate increase in total output through year-end.
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.
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