Business activity apparently returned to positive growth in October, but only just. At 50.7 the PMI was up 1.2 points versus its September print but still close enough to the 50 expansion threshold to signal little change in economic momentum.
Actual output strengthened usefully with the sub-index gaining 4.6 points at 53.7. Backlogs (51.2) also accumulated again, albeit at a reduced pace versus August. However, quantity of purchases (50.5) was broadly unchanged and employment (44.0) continued to suffer. Purchase prices (36.1) fell very sharply once more and at much the same pace as in the previous month.
The PMI has been oscillating either side of 50 since May and October's outturn suggests that the economy is still adjusting to the shock appreciation of the Swiss franc in January. The worst would seem to be over, but getting back onto a significant and durable recovery path is proving problematic and the ongoing weakness of prices remains a major policy threat. Further SNB easing by year-end would not come as a surprise.
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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