CH: KOF Swiss Leading Indicator

Thu Nov 30 02:00:00 CST 2017

Consensus Actual Previous Revised
Level 109.2% 110.3% 109.1% 109.8%

The KOF's leading economic barometer was unexpectedly robust in November. At 110.3, the index was up 0.5 points versus a stronger revised October reading to register its highest mark since June 2010. This was also the indicator's third consecutive advance.

As in October, the buoyancy of the headline measure reflected gains in manufacturing. Construction, which deteriorated in October, also turned up while export prospects and the outlook for consumption, accommodation and food service activities remained largely unchanged. Banking slowed.

The November results are very positive and suggest that the improvement seen in third quarter GDP (see today's calendar entry) could be furthered in the current period. However, it is no coincidence that the upturn in manufacturing has followed the weakening in the CHF and, to this end, the performance of the currency remains vital to the overall economic prognosis.

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.