The KOF's leading indicator for once surprised on the upside in July. From a marginally softer revised 96.1 in June, the headline index rose to 92.2, its first increase since March and 1.7 points stronger than the market consensus. That said, it remains well below its 100 long-run average.

July's advance reflected gains in financial and insurance services as well as in foreign demand and domestic consumption. However, the outlook for construction activity and for manufacturing, where prospects are particularly gloomy, deteriorated.

Moreover, despite its rise, the July index points to sub-par growth over coming months that should leave a question mark hanging over possible further SNB tightening in September. It also leaves the Swiss ECDI below zero at minus 12 but lifts the ECDI-P to 4, the latter's first positive reading since early February. Having lagged expectations for months, real economic activity is finally catching up with forecasts.

The leading indicator is seen slipping from June's 90.8 to 90.5.

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 KOF Swiss Economic Institute publishes this indicator monthly.