Manufacturing activity was very weak at quarter-end. At just 43.9, the SVME PMI was well short of both May's 46.4 and the market consensus. Although only a 2-month low, the latest reading suggests that the sector remains deep in recession.

Production and order books were sharply weaker and purchasing volumes and employment similarly fell again.

The surprisingly poor results push the Swiss RPI (minus 30) and RPI-P (minus 18) deeper into negative surprise territory with the former now at its lowest level since early April.

Swiss manufacturing activity is expected to remain in contraction in June, with the SVME purchasing managers' index seen staying below the neutral line of 50 and slipping to 45.3 after improving to 46.4 in April from 41.4 in March.

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.