The February PMI weighed in at a very healthy 57.8, up 3.2 points versus its January reading and easily far enough above the 50 growth threshold to signal another very good month for Swiss business activity. This was the seventh successive increase in the index and its highest reading since April 2011.
All of the main subcomponents painted an upbeat picture. In particular, output (up 2.9 points at 59.9) moved further into boom territory and backlogs (also up 2.9 points at 58.1) were not far behind. With the quantity of purchases measure (56.6) moving comfortably back above 50, supplier delivery times (62.5) at almost a 6-year peak and employment (56.9) also performing strongly, the signs are that first quarter GDP should be very robust. The SNB will also note the prices index which, at 64.1, was down from January's 65.9 but still historically very high.
The central bank should be more than a little pleased with today's survey results. If borne out in the hard data, the Swiss economy will have begun 2017 on a much firmer footing than expected. Indeed, growth may even be fast enough to provide a much-needed boost to inflation. The danger now is that an improving Swiss economy prompts fresh capital inflows into an already overvalued CHF that makes achieving the central bank's price stability goals all the more difficult.
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.