The combined producer and import price index rose 0.2 percent on the month in October. The increase, the first since June, was marginally firmer than expected and only large enough to nudge the annual inflation rate a tick higher to minus 0.9 percent. This was the sixth straight month in which the yearly print has been below zero.

Domestic producer prices were up 0.1 percent versus September, trimming their 12-month rate from 0.9 percent to 0.8 percent. Import prices climbed a sharper 0.4 percent, leaving their annual rate steady at minus 4.1 percent.

Within the PPI, petroleum products advanced 5.3 percent on the month, easily the steepest increase and adding 0.1 percentage point to the overall change. Elsewhere, prices were typically broadly flat, the main exception being electrical equipment (minus 1. 1 percent). Import prices were similarly lifted by a 4.1 percent increase in petroleum products which added more than 0.2 percentage points. Consequently, the underlying composite index was 0.1 percent lower on both the month and the year, matching the respective September rates.

Today's update leaves intact the softening trend in underlying pipeline inflation pressures in Swiss manufacturing and should further boost the probability that the SNB's policy rate has peaked. More generally, the data put the Swiss RPI at minus 3 and the RPI-P at minus 5. Both values are close enough to zero to indicate that economic activity in general is behaving much as expected.

Prices are seen edging 0.1 percent higher on the month after a 0.1 percent dip in September.

The producer price and import price index focuses on the actual prices of products on the market (transaction price) at the time of the order. The prices of domestic products are taken at the producer or factory level, excluding value added tax and consumption taxes. For imports, prices are collected at the Swiss border, without the value added tax, taxes on consumption and tariffs. Changes in the index provide a guide to inflation from the point of view of the product's producer/manufacturer

The producer price and import price index measures prices at the producer level before they are passed along to consumers. Since the producer price index measures prices of consumer goods and capital equipment, a portion of the inflation at the producer level gets passed through to the consumer price index (CPI). By tracking price pressures in the pipeline, investors can anticipate inflationary consequences in coming months. Producer and import prices are more volatile than consumer prices. While the CPI is the price index with the most impact in setting interest rates, the producer price and import price index provides significant information earlier in the production process. The producer price and import price index is considered a precursor of both consumer price inflation and profits. If the prices paid to manufacturers increase, businesses are faced with either charging higher prices or they taking a cut in profits. The ability to pass along price increases depends on the strength and competitiveness of the marketplace. The bond market rallies when the producer price and import price index decreases or posts only small increases, but bond prices fall when the index posts larger-than-expected gains. The equity market rallies with the bond market because low inflation promises low interest rates and is good for profits.