CH: SVME Purchasing Managers' Index

July 3, 2017 02:30 CDT

Consensus Actual Previous
Level 56.4 60.1 55.6

The PMI continued to signal solid economic growth in June and at markedly faster rate than in May. In fact at 60.1, the headline index was up fully 4.5 points versus its mid-quarter reading and at its highest level since February 2011.

The end of quarter bounce put the PMI back into technical boom territory and reflected a 10-point surge in the output sub-index to 63.4. Backlogs (up 0.4 points at 59.9) saw a 4-month high and while the quantity of purchases (59.7 after 60.9) declined, the latest reading was still historically very firm. Pressure on capacity was apparent in a fresh lengthening of suppliers' delivery times (a very high 65.3 after 63.8) and employment (58.1 after 51.8) posted its strongest level in more than six years.

The monthly data can be volatile but, at 57.7, the second quarter average was up 0.7 points from its already robust first quarter print. So, taken at face value, today's results suggest extremely high levels of business activity. However, this is contradicted by a soft consumer sector which saw quarterly spending growth of just 0.1 percent at the start of the year and a near-certain sharp contraction in retail sales in the period just ended (see today's calendar entry).

It may well be that the PMI is painting an overly optimistic picture of the Swiss economic recovery.

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.