Economic activity expanded for the first time this year according to the August PMI survey. At 52.2, the headline index was up 3.5 points versus its July reading and at its highest level since December 2014.
Output was particularly strong, the sub-index rising 7 points to 62.4 for its strongest reading since December 2010. There was also a tidy 3.9 point gain in backlogs to 52.4 and a near-3 point advance in quantity of purchases to 55.3. Even so, it was not all good news as stocks of finished goods continued to fall (49.7) as did employment (42.9). This suggests that companies are far from confident about the economic outlook. Moreover, purchase prices were even weaker, the sub-index here off a further 4.1 points to just 36.1.
August's PMI was more than 3 points above its second quarter average when real GDP unexpectedly grew at a 0.2 percent quarterly rate. As such, today's report should sit reasonably well with the SNB. Nonetheless, with deflationary pressures still a worryingly prominent feature, central bank policy will remain highly accommodative for some time yet and the risks are still for even more negative interest rates should consumer prices fail to turn up.
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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