The KOF's leading economic index showed a surprisingly sharp fall in November. At 102.2 the headline index was 1.7 points short of its lower revised October print to register it first decline since August. However, it remains above its 100 long-run average and should be consistent with moderate growth of GDP going forwards.
The fall was attributable to relative weakness in the hotel and catering industry and in manufacturing. The problems for the latter largely related to worries about competitiveness and the situation regarding intermediary inputs. The only positive influences of any significance were in the financial sector and international economy.
At an average 103.1 for the first two months of the fourth quarter the headline index is almost two full points higher than its third quarter mean. This should point to a slight improvement in economic growth after what is likely to prove a subdued third quarter (data due Friday).
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.