If the latest PMI survey is anything to go by, business activity continued to expand at a healthy clip in January. Even so, at 54.6, the headline index was down 1.8 points versus its upwardly revised December reading and at its lowest level since last September.
The apparent cooling was attributable to slower growth of output (57.0 after 59.9) and backlogs (55.2 after 60.4). Quantity of purchases (49.8 after 55.0) also contracted for the first time since August. However, supplier delivery times (57.9) lengthened more sharply than at year-end and employment (52.0) posted its strongest increase in seven months. Stocks of finished goods (49.2) were little changed but purchase prices (65.9 after 61.3) accelerated significantly.
Following December's near-boom conditions report some drop in the January PMI was always very probable. As it is, the fall still leaves a generally respectable set of sub-indices that should be reflected in a decent start to 2017 by the Swiss economy as a whole.
The Association for Purchasing and Supply Management's Purchasing Managers' Index (PMI) is produced in conjunction with Credit Suisse. The PMI provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector of purchasing managers. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).
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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