Swiss industry remains nervous
Published: Monday, Jun 3rd 2024, 09:50
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The mood in Swiss industry remains nervous. Although the Purchasing Managers' Index (PMI) rose again slightly in May, it remains below the growth threshold. And the PMI for services has almost completely reversed the recovery from the previous month.
Both leading indicators would thus continue the volatile sideways trend since the second quarter of 2023, UBS announced on Monday. The major bank calculates the index together with the Swiss purchasing and supply management association Procure.ch.
The seasonally adjusted PMI for industry rose by 5.0 points to 46.4 points in May, remaining below the growth threshold for the seventeenth consecutive month. The last time it was above 50 points was in December 2022.
PMI values above 50 points indicate growth and values below 50 points indicate a decline in the economy. Economists surveyed by the news agency AWP had expected the index to be lower - in the range of 43.5 to 46.0 points.
Long phase in the shrinkage range
The low point in the current cycle was 38.5 points in July 2023, when it plummeted to its lowest level since 2009. It has now been in contraction territory for longer than during the major financial crisis.
The recovery of the PMI in May was mainly supported by the production (+10 points) and order backlog components (+7.5). Delivery times also rose by 4 points. An increase in delivery times usually indicates higher capacity utilization in production and thus signals further upward potential.
In the current tense geopolitical situation, however, an increase could just as easily indicate a delay in the supply chains. This in turn would have a negative impact on industrial production. On the other hand, inventories in purchasing, where the reduction has accelerated, would have prevented an even stronger rise in the index.
Service providers under long-term trend
While industry continues to weigh on growth, the service sector is likely to support the economy slightly, according to the report. However, the PMI for service providers fell by 6.5 points to 48.8 points in May. The main reason for the decline was the order backlog; the sub-component fell by 12.4 points. However, the business activity, new orders and employment components also fell.
According to UBS, the indicator has been above the growth threshold of 50 on average in recent months, but below the long-term average of around 54.5 points. This points to growth in the services sector, although this is likely to be below the long-term trend.
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