The KOF's leading indicator slipped in August, failing to sustain July's improvement and undershooting the market consensus. The headline index declined to 91.1 from a revised 92.1 in July (originally reported as 92.2) with most components softening in the month, pointing to a"somewhat unfavourable economic situation in the near future," according to the KOF.

Sentiment in services, export-oriented sectors and the leisure/hospitality sectors"worsened" in August, according to the KOF, while manufacturing and construction"developed negatively." On the positive side, capacity utilisation and the situation of intermediate products showed some improvement.

The latest data raise further question marks over whether the SNB will continue to tighten at its September meeting, after lifting its benchmark rate by 25 basis points to 1.75 percent in June. Today's surprisingly soft outturn leaves both the Swiss ECDI and ECDI-P at minus 16, and so still in negative surprise territory. Economic activity in general continues to lag market expectations.

After rising from 90.7 in June to 92.2 in July, KOF's leading indicator is expected to fall back to 91.3 in August.

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.