April's PMI survey again indicated solid growth of Swiss business activity. At 57.4, the headline index was actually 1.2 points short of its March reading but still easily far enough above the 50 growth threshold to signal a very good month for the local economy.
Most of the major components posted monthly declines but from such robust levels at the end of last quarter that it made little difference, Hence, output (down 2.4 points at 59.1), backlogs (down 2.6 points at 58.7) and the quantity of purchases (down 1.0 points at 54.7) all lost some momentum but continued to increase at a very healthy clip. Indeed, suppliers' delivery times (up 1.3 points at 1.3) lengthened more sharply than in March and that despite a stronger increase in headcount (up 1.0 points at 55.3). That said, purchase prices (down 5.1 points at 58.6) cooled to a 7-month low.
Despite the drop in the headline PMI, today's survey results bode extremely positively for the Swiss economic outlook. Not only are production and new orders expanding at near-boom rates but accelerating jobs growth should help to underpin the recent pick-up in household spending. The SNB should be more than a little pleased with this report.
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.