The KOF's leading economic index was unchanged at 102.2 in December. The gauge thus remained slightly above its 100 long-run average and so points to moderate growth of business activity over the near-term
The stability of the headline measure masked positive effects from manufacturing offset by a negative contribution from construction. The financial sector, alongside hotel and catering, domestic consumption and the international economy, had a broadly neutral impact.
The Swiss economy stalled in the third quarter when the KOF's index averaged 101.2 but early evidence of the fourth quarter has been more promising. Even so, with EUR/CHF only just above CHF1.07 and deflationary risks still very much alive, the SNB will be taking nothing for granted.
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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