CH: KOF Swiss Leading Indicator

Wed Aug 30 02:00:00 CDT 2017

Consensus Actual Previous Revised
Level 107.0% 104.1% 106.8% 108.0%

The KOF's leading economic indicator weighed in at a markedly weaker than expected 104.1 in August, down from a stronger revised 108.0 in July and its lowest reading since May.

The decline was led by the hospitality industry, compounded by manufacturing, construction and exports. The financial sector was broadly neutral while domestic consumption provided a modest boost.

Despite its fall, the index remains comfortably above its 100-historic norm and so continues to signal above average growth over the next few months. Recent volatility has masked the underlying trend but, if sustained, the slide in the CHF versus the euro since late July should be a positive factor going forward.

The KOF Economic Indicator is a composite leading indicator that aims to identify shifts in the Swiss business cycle around three months ahead of the actual event and, until the start of 2014, was based on twenty-five different economic indicators. The old version of the KOF Economic Indicator used the previous year's GDP growth rate published by the Swiss State Secretariat for Economic Affairs (SECO) as a yardstick. The revised measure still incorporates SECO data; however, KOF has changed over to month-on-month changes in GDP which are generated via statistical methods. This reference series is not about exact GDP figures but about the direction and strength of the economic trend. The new objective of the Barometer is the same as the old objective: achieving maximum possible accuracy in predicting the Swiss business cycle.

The indicator measures overall economic activity through a qualitative business survey about developments in the recent past, the current situation and expectations for the next three to six months. Getting an accurate handle on where the economy is headed is inevitably a vital element in all investment decisions and the new measure uses some 219 variables in order to do just that. The set of variables will be reviewed every autumn.

Survey questions relate to production, orders and stocks of finished goods. The Swiss Institute for Business Cycle Research (KOF) publishes this indicator monthly.