CH: SVME Purchasing Managers' Index

June 1, 2017 02:30 CDT

Consensus Actual Previous
Level 57.8 55.6 57.4

The May PMI weighed in at 55.6, down almost 2 points versus its April reading and clearly on the soft side of expectations. Still, it remained comfortably above both the growth threshold (50.0) and its long-run average (53.7) and so should be indicative a decent month for Swiss economic activity.

The fall in the headline index mainly reflected slower growth of production (down 5.6 points at 53.5) and employment (down 3.5 points at 51.8). However, both components can be quite volatile on a monthly basis. Elsewhere, the news was more positive with backlogs (up 0.8 points at 59.5) and quantity of purchases (up 6.2 points at 60.9) in particular suggesting that companies are still in optimistic mood. A further marked lengthening in vendor delivery times (63.8) was also consistent with strong demand. Even so, inflationary pressure from purchase prices continued to ease with the sub-index here falling a further 2.1 points to 56.5, a 7-month low.

Overall today's results are quite respectable and should presage a healthy rate of economic expansion this quarter. That said, the first quarter PMI overestimated real GDP growth so risks for the second quarter are probably on the downside.

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.