The economic barometer for Switzerland increased in May to 98.5 from 97.1 in April, bolstered by positive trends in the manufacturing sector. This dynamic has been evident in other European countries as well, although it is too soon to start talking about green shoots for the sector.

Chemicals and pharmaceuticals, one of the backbones of Swiss industry, reported positive developments. Construction is also on the upswing, which should come as no surprise to anyone travelling around Switzerland.

Still, the demand side is subdued, particularly for foreign demand and private consumption. A weaking was also seen in purchases and intermediate goods inventories.

While today's developments hint at some positive developments, the overall situation remains below its long-term average. A combination of slack demand and negative inventory developments suggest there isn't likely to be a quick upturn in the overall economy.

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.