KOF Economic Barometer: Slight Weakening

The decline of the KOF Economic Barometer in November is primarily due to a bundle of indicators from the manufacturing sector and private consumption. In addition, indicators relating to foreign demand and the other services sector send a negative signal. By contrast, indicators for accommodation and food service activities, the construction industry and the financial and insurance services sector remained virtually constant.

In the goods producing sector (manufacturing and construction), indicators for the further development of new orders and profits are in particular showing a negative development. Furthermore, sub-indicators for the assessment of production and the overall business situation are pointing in a downward direction. On the other hand, sub-indicators assessing the export prospects of companies show a slightly positive tendency.

The negative signals within the manufacturing sector are in particular due to indicators for the metal industry, the paper and printing sector, the machine and vehicle construction industry and other manufacturing sectors. By contrast, sub-indicators for the electrical industry send a positive signal. However, indicators for the remaining sectors, including the textile and clothing industry, the chemical, pharmaceutical and plastics industries and the food and beverages sector remain constant.

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.