The PMI dipped back below the 50 expansion threshold in September. At 49.5, the activity index was nearly 3 points below its August reading but still above July's 48.7 print and close enough to 50 to suggest that the economy essentially stagnated over the month.
The setback reflected a sharp reversal in output for which the sub-index slumped fully 13.4 points to 49.1 and weaker growth of backlogs (51.5 after 52.4). Employment (43.6) also fell sharply again and quantity of purchases slowed notably (51.2 after 55.3). Purchases prices (35.1 after 36.1) remained very depressed.
The September outturn puts the average PMI for the third quarter at 50.1, up from 49.1 in the previous period and 47.8 in January-March. Accordingly, despite the monthly volatility, the signs are that the economy is in a slow recovery mode and real GDP growth last quarter should again carry a positive handle. However, the pick-up in business activity will probably need to acquire considerable more momentum if ongoing deflation concerns are to be allayed. For now, some form of additional ease from the SNB is still a clear possibility.
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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