In line with August, the September SVME PMI was comfortably stronger than expected. At 49.9, the headline index was some 1.7 points above the market consensus and only marginally short of the 50-expansion threshold. This was its highest reading since December 2022 and, taken at face value, suggests that the economy stagnated at the end of last quarter.

In fact, since the PMI has consistently underestimated GDP growth for some while, it may be that economic momentum is more robust than today's report might intimate. This view would be consistent with the recent run of surprisingly firm data that have lifted the Swiss RPI to 18 and the RPI-P to 29 following a sustained period of sub-zero readings. Inflation is still key but the odds on another SNB policy rate cut in December are gradually lengthening.

At 48.2, the PMI is expected to lose some ground after a surprisingly sharp bounce in August.

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.