KOF Economic Barometer: Downward Tendency Becomes Clearer
The KOF Economic Barometer starts in 2019 with 95 points. It has fallen for the fourth time in a row and is now 5 points below its long-term average. The downward tendency that emerged at the end of last year continues. The economic outlook for Switzerland continues to dampen at the beginning of 2019
In January 2019, the KOF Economic Barometer fell from 96.4 points (revised from 96.3 points) to 95 points. This renewed decline is especially attributable to negative developments within the manufacturing industry and the service industry. In addition, export prospects cloud over. On the other hand, indicators for the hotel and catering sector, the banking and insurance sector as well as the construction sector send positive signals.
In the goods producing sector (manufacturing and construction), indicators on the competitive position and order backlogs are mainly responsible for its negative development. Furthermore, indicators for the development of production reinforce this signal. However, indicators for the development of production capacity curb this downward movement slightly.
The markedly negative sentiment within manufacturing is mainly driven by mechanical engineering and manufacturers of electrical goods. Developments within the metal and wood industries also reinforce this tendency.
KOF Economic Barometer and reference time series: annual update
The annual 2018 revision took place in September. 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 more than 500 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 early September 2018. SECO, in turn takes the release of the previous year’s annual GDP data published by the SFSO into account. The 2017 vintage of the KOF Barometer (published until August 2018) comprised 273 indicator variables.
The current 2018 vintage, which is now replacing the 2017 vintage, consists of 345 indicator variables, selected from a pool of more than 500 candidate variables. Compared to the previous vintage, 104 indicators are new and 32 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.