The PMI climbed again in March, this time reaching a stronger than expected 58.6 and its highest level since February 2011.
Production (61.5) was especially robust once more and is averaging in excess of 60 over the quarter so far. Moreover, backlogs (61.2) were not far behind and quantity of purchases (55.7) similarly remained well into positive growth territory. Despite this, stocks of purchases (47.4) declined, probably reflecting surprisingly high demand. This view was supported in a further significant lengthening in supplier delivery times (61.7). Employment (54.3) expanded for a third successive month and purchase prices continued to rise at one of the fastest rates seen since 2011.
Today's results should sit well with the SNB. Accelerating economic activity and rising prices is just what the central bank wants to see. However, such a combination could make the CHF all the more attractive to overseas investors so the SNB will probably have to be extra vigilant in its efforts to prevent any further appreciation by its currency.
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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