The PMI fell for a second consecutive month in July. At a weaker than expected 50.1, the activity indicator saw its lowest level since January and indicated near-stagnation in Swiss industry.
Output (53.6) continued to show respectable growth but was still down on its June posting (53.4) and backlogs (49.3) dropped below the 50 expansion threshold as did the quantity of purchases (48.3). Somewhat surprisingly, suppliers' delivery times lengthened (54.6) but stocks of purchases declined again (43.7) and employment similarly decreased (46.7) having recovered in May/June from an 18-month period of decline. Prices were down again, albeit at a slightly slower rate than at quarter-end.
Today's figures warn that what appears to have a been a reasonable period for economic growth in the first half of 2016, cannot be taken for granted. July may just prove to be a temporary hiccup but clearly the risk is that the relatively fragile recovery to-date might prove short-lived. In any event, the implications are that SNB policy will continue to be very accommodative over the foreseeable future.
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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