CH: KOF Swiss Leading Indicator

Wed May 30 02:00:00 CDT 2018

Consensus Actual Previous Revised
Level 104.6% 100.0% 105.3% 103.3%

KOF's leading economic indicator fell 3.3 points to 100.0 in May, its weakest reading since December 2015 and equalling its long-run average. This was its third decline in as many months and the steepest since January.

The headline deterioration was led by worsening conditions in manufacturing and construction but there were smaller negative contributions too from household consumption and exports. Only accommodation and food services as well as the banking sector showed any improvement.

Expectations for tomorrow's first quarter Swiss GDP print are quite buoyant but if today's report is anything to by, the second quarter could be significantly weaker.

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.