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| Index | 48.8 | 45.8 |
Highlights
The manufacturing sector improved in January, but still remains in contraction. The purchasing managers index rose 2.4 points to 48.8, and remains below the level of 50 above which marks expansion where it has remained for just over three years.
Although the production component moved into expansion in January with a reading of 50.8, a number of other components remained in contraction. Inventory levels were higher, but at 47.7 still not expanding. Similarly, purchasing improved marginally, but at 43.1, remains quite constrained, suggesting a lack of demand amidst higher procurement costs.
After waning in recent months, companies are expecting increased protectionist measures in the coming twelve months. Although a trade agreement was reached with the United States last year, it shows that companies are wary that the situation could change on very short notice.
The Services PMI tell a different story, improving to 53.8 in January, the highest reading since 55.3 in May of last year. In December, the reading was at 51.4. Taken together, that is the first time, also since May, that there were two consecutive readings above 50.
Clearly manufacturing is still suffering and caution is prevalent among the firms. Services are a bright spot and could potentially be a driver of modest expansion.
Definition
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).
Description
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.