The manufacturing sector took a turn for the worse in December, with the PMI falling to a seasonally adjusted 45.8 in December from 49.7 in November, to its lowest level since May. The result has the unwelcome distinction of marking exactly three years of contraction in the sector.

Order levels were the main drag, with the subcomponent falling 7.1 points to 41.1 in December, while inventories purchasing fell 6.3 points to 42.5. The employment component also weighed on the overall result, contracting to 46.4 from 49.9 in November.

On a positive note, the number of firms expecting increased protectionism decreased, signaling optimism following a reduction in US-imposed tariffs from 39 percent to 15 percent. The number of companies expecting increased stress from protectionist measures fell below 30 for the first time since March. Currently, 18 percent of companies expect an increase.

Conversely, the services sector expanded in December, with the index having improved to 52.1 from 45.3 in November, the best result since 56.3 in May. All subcomponents are in expansionary territory save for employment which rose to 46.8 from 45.5 in November.

The are no real positives to take away from the manufacturing result which ended the year on quite a negative note. Services are somewhat of a bright spot, but taken together the private sector is facing challenged. It remains to be seen if the less pessimistic view on protectionist measures turns into more positive sentiment and increased orders for 2026.

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.