CH: KOF Swiss Leading Indicator

Tue May 30 02:00:00 CDT 2017

Consensus Actual Previous Revised
Level 106.1% 101.6% 106.0% 106.3%

KOF's May leading economic index was surprisingly weak. Following a slightly firmer revised 106.3 in April, the headline indicator fell fully 4.7 points to 101.6. This was its steepest decline in more than two years and equalled its lowest reading since August 2016.

May's slide was mainly due to a negative contribution from manufacturing. However, domestic consumption, the financial and construction sectors and exports all subtracted too so the headline drop was ominously broad-based.

The index is still above its 100 long-run average and so should be indicative of respectable growth going forward. Even so, the fall suggests a significant deceleration in economic activity that will not sit well with the SNB. Following poor first quarter employment data yesterday (see calendar entry), the Swiss economic recovery has started to look a little less convincing.

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.