After topping 100 in July for the first time since March, there were expectations that the third quarter was off to a good start for the Swiss economy. Those hopes were dashed today as economic confidence fell 3.9 points in August to 97.4 from a revised 101.3 in July.

The outlook for the manufacturing and hospitality industries were particularly negative. US tariffs of 39 percent imposed on Switzerland in August are being particularly felt in the export and business conditions components, according to KOF. To date, there is no sign of an imminent agreement to bring Switzerland's tariffs to be more in-line with those of 15 percent on the EU.

For the important chemical and pharmaceutical sectors, sentiment is particularly negative as they are for other sectors such as electronics and food and beverage producers.

There is no getting around the fact that US tariffs are beginning to take a toll on the Swiss 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.