KOF Economic Barometer: Recovery weakens

The lower level of the KOF Economic Barometer in October is in particular due to negative developments of the indicator bundles of the economic sector other services, the accommodation and food service activities and foreign demand. In addition, indicators relating to the manufacturing sector also recorded a decline. By contrast, private consumption and the construction sector remained virtually stable relative to the previous month.

Within the manufacturing sector, indicators for the electrical industry, the food and beverage sector and the metal industry in particular are pointing in a negative direction. Indicators for the mechanical engineering industry, on the other hand, are sending a slightly positive signal. Bundles of indicators from the remaining sectors, including the textile and clothing industry, the paper and printing sector, the wood, glass, stone and earth sector as well as the chemicals, pharmaceuticals and plastics sector remain virtually unchanged compared to the previous month.

In the goods producing sector (manufacturing and construction), indicators for the assessment of export prospects, the general business situation and production capacities in particular point in a negative direction. This assessment is reinforced by indicators relating to the competitive situation. On the other hand, indicators for the assessment of inventories, employment and the purchase of intermediate goods send a positive signal.

KOF Economic Barometer and reference time series: annual update

The annual 2020 revision took place in October. These updates always comprise the following steps: a redefinition of the pool of indicators that enter the selection procedure, an update of the reference time series and a renewed execution of the automated variable selection procedure.

The updated pool of indicators now consists of 610 economic time series. The updated reference series is the smoothed continuous growth rate of Swiss GDP distributed across the three months of a quarter, based on the official quarterly real GDP statistics, adjusted for the effects of major international sporting events, as released by the Swiss State Secretariat for Economic Affairs (SECO) in late September 2020. SECO, in turn takes the release of the previous year’s annual GDP data published by the SFSO into account. The 2019 vintage of the KOF Barometer (published until September 2020) comprised 376 indicator variables.

The current 2020 vintage, which is now replacing the 2019 vintage, consists of 335 indicator variables, selected from a pool 610 candidate variables. Compared to the previous vintage, 59 indicators are new and 100 dropped out of the set of selected indicators. The Barometer is the rescaled weighted average of the selected indicators, where the weights correspond to the loadings of the first principal component.