Manufacturing activity continued to contract in May but significantly less sharply than in April and by less than expected. At 46.4, the SVME PMI was some 5 points above its level at the start of the quarter and a point stronger than the market consensus. This was its highest reading since March last year but still well short of 50-expansion threshold.

Production, order books, employment and purchasing volumes all fell again but at reduced rates compared to April.

The surprisingly firm results lift the Swiss RPI to 19 and the RPI-P to 14. Both measures show economic activity in general now running somewhat faster than forecast.

The may report is expected to show a reduced rate of contraction with the headline index seen at 45.4, up from April's 41.4.

The SVME (Schweizerischer Verband für Materialwirtschaft und Einkauf) Association for Purchasing and Supply Management's Purchasing Managers' Index (PMI) is produced in conjunction with Credit Suisse. The PMI provides an estimate of manufacturing business activity for the preceding month by using information obtained from a representative sector of purchasing managers. Results are synthesised into a single index which can range between zero and 100. A reading above (below) 50 signals rising (falling) activity versus the previous month and the closer to 100 (zero) the faster is activity growing (contracting).

The PMI is very sensitive to the business cycle and tends to match growth or decline in the economy as a whole. To construct the PMI the Swiss Association of Purchasing and Materials Management conducts monthly surveys of purchasing executives on their performance in the current month versus the previous period. Because the amount of materials ordered by purchasing managers parallels the level of manufacturing production, the PMI is a gauge of production growth. The results are indexed with a centerline of 50; values above 50 indicate expectations of expansion and values below 50 indicate expectations of contraction for the manufacturing sector.