CH: KOF Swiss Leading Indicator

Thu Mar 29 02:00:00 CDT 2018

Consensus Actual Previous Revised
Level 107.3% 106.0% 108.0% 108.4%

March's KOF leading economic index more than gave back February's revised 0.8 point gain. At a surprisingly soft 106.0, the indicator was 2.4 points short of its mid-quarter reading and at its lowest level since last August. It was also 5.3 points below its recent peak in December 2017.

The main drag came from manufacturing, where overall business sentiment deteriorated, and the export industry. Elsewhere, the financial sector and the hospitality industry were broadly flat as was domestic private consumption.

March's setback leaves the index still comfortably above its long-run average (100) and so consistent with economic growth remaining stronger than its historic norm. Nonetheless, while the monthly data can be volatile, without a rebound in April the implications would be for some loss of momentum over coming months.

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.