CH: KOF Swiss Leading Indicator

Mon Oct 30 03:00:00 CDT 2017

Consensus Actual Previous Revised
Level 106.0% 109.1% 105.8% 106.1%

The KOF's October leading economic index was surprisingly strong. At 109.1, the headline measure advanced a full 3 points versus its upwardly revised September reading to register its highest mark since September 2010.

Last month's buoyancy was largely attributable to positive developments in the banking and manufacturing sectors, the latter mainly reflecting strength in the machinery, metal, electrical equipment and paper categories. In addition, there were fresh gains in exports and accommodation and food. However, by contrast, consumption only stagnated and construction declined.

Following a disappointing third quarter, the October KOF results suggest that the economy has acquired some momentum again. This should bode well for Wednesday's PMI report although this has been an overly optimistic indicator of real GDP growth for some time now.

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.