The KOF's leading indicator strengthened further in December. At 97.8, the latest reading was up from November's stronger revised 97.2 and an 8-month high. Even so, while 0.5 points above the market consensus, it remained well short of its 100 long-run average, as it has every month since March.

The monthly gain was mainly due to better performances in manufacturing, notably in textiles, metals and the mechanical engineering, and private consumption. Bundles of indicators in the other sectors remained virtually unchanged from their respective levels in the previous month.

Despite December's improvement, today's update still suggests that near-term growth will be quite sluggish. It also puts the year-end Swiss RPI at exactly zero, meaning overall economic activity is running in line with market expectations. However, the reading here would be higher but for the surprising weakness of prices the real economy is running hotter than forecast as testified by the RPI-P which stands at a solid 30. Such a combination will suit the SNB very nicely.

The headline index is expected to creep up to 97.3 from 96.7 in November.

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.