Economic sentiment rose in December to its highest reading since September of last year, helped in large part by an improvement in the manufacturing sector. The Economic Barometer gained 1.7 points to 103.4.

The index was further buoyed by the employment outlook, general business situation, and inventory buildup of intermediate goods. The improved outlook suggests stockpiling is the result of the anticipation of increased business activity rather than due to slowdown.

Still, there are issues with demand on both private consumption and foreign demand, reflecting continued caution. Also displaying some weakness among respondents were production and order backlogs.

Today's data are encouraging, with the indicator gaining in the past four months after dropping to 97.0 in August from 101.0 in July. That sets the stage for continued improvement for next year.

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.