The KOF's leading economic barometer posted its first decline in three months in March. However, at 102.5, the headline index was down a tick versus a minimally higher revised February outturn to secure its second strongest mark since May 2015.
Private consumption provided much of the impetus while the financial sector and construction were essentially flat and both manufacturing and exports declined.
Expanding order books point to a pick-up in production next quarter but employment still looks likely to slide as firms struggle to regain competitiveness. Nonetheless, the indicator has now recorded three consecutive readings above its 100 long run average which suggests that an economic recovery is gradually becoming more fully entrenched.
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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