The KOF's leading economic indicator was essentially unchanged in July. At 102.7, the headline index was just 0.1 points above its slightly firmer revised June reading and at a 4-month high. In line with other European business surveys today's report suggests limited initial impact from the Brexit vote.
The minimal improvement reflected better conditions for Swiss exporters and a more optimistic banking sector. However, manufacturing morale was down while domestic consumption, construction, hotels and catering moved sideways.
The KOF's index has been within a tight 101.8-102.8 range since February. While above its 100 long-run average the stability of the measure suggests no pick-up in economic momentum which cannot be good news for the SNB's chances of getting inflation (minus 0.4 percent in June) back towards the 2 percent mark any time soon.
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.