The PMI was surprisingly strong in October. At 54.7, the headline index was up 1.5 points from its September outturn to register its third successive rise and equal its highest level since April 2014.
The unexpectedly sharp improvement was led by a hefty gain in production (up 5.4 points at 58.2). Backlogs (55.6 after 55.2) also expanded markedly and the quantity of purchases (51.5 after 50.3) moved further into positive growth territory. Purchase prices (52.8 after 49.9) also moved above 50 and employment (50.2 after 47.0) posted its first positive growth reading in four months.
With stocks declining and delivery times slowing, the signs are that demand was unexpectedly robust last month. This suggests a decent start to the fourth quarter for Swiss GDP but with little else pointing to any significant pick-up in domestic demand, the risks are that November sees a setback. Still, for now the data are reassuringly upbeat and will be more than welcome at the SNB.
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.