KOF Economic Barometer

A leading Composite Indicator for the Swiss Business Cycle

Since the 1970s, the KOF Swiss Economic Institute is publishing a leading composite indicator, the KOF Economic Barometer, predicting how the Swiss economy should perform in the near future. The methodology was overhauled in 1998 and again in 2006. The last thorough revision was conducted in 2014.

The present version of the Barometer is based on a reference series computed by KOF, the month-on-month growth rate of Switzerland’s Gross Domestic Product, based on the quarterly breakdown of the Swiss Federal Statistical Office’s data by the Swiss State Secretariat for Economic Affairs. The objective of the Barometer is to indicate the stance of the Swiss business cycle, as captured by our reference series, as early as possible.

The present database consists of more than 400 variables. We apply two criteria to decide which of these variables are included into the computation of the Barometer: Firstly, the variables must have an economically plausible influence on the Swiss business cycle. Secondly, the cross correlation with the reference series must display a pre-determined combination of lead and minimum strength.

This transparent and comprehensible selection algorithm is repeated every autumn. The number of selected variable usually exceeds 200, but the selection and number usually changes from year to year. This allows the Barometer to ‘learn’ and makes it more flexible.

The performance of the new Economic Barometer is further improved as we abandoned the low pass filters that were previously applied.

Since its beginning, the Barometer has been offering reliable and timely information on the Swiss business cycle in the near future. Thanks to the new annual selection procedure and the broader database, the latest version of the KOF Economic Barometer will continue to do so in the future.