KOF Economic Barometer

What Is the KOF Economic Barometer?

The KOF Economic Barometer is a composite indicator that gives a dependable perusing on the course of GDP growth for the Swiss economy compared with a similar quarter a year sooner. The KOF Economic Barometer depends on a multi-sectoral design with three modules: core GDP, construction, and banking.

The barometer has a complex structure since it groups north of 500 individual indicators in several steps. It is distributed month to month by the KOF Swiss Economic Institute.

Grasping the KOF Economic Barometer

The concept of the barometer is to demonstrate the situation with the Swiss business cycle, as captured by a reference series that mirrors the Swiss GDP month to month growth rate, as soon as could really be expected. Developments in the KOF Economic Barometer on average lead developments in the reference series by one month. The KOF Economic Barometer demonstrates leading indicator properties with respect to both the synthetic reference time series and with genuine quarterly growth rates of Swiss GDP.

Albeit the KOF Institute alerts that no ends can be drawn about the level of the GDP growth rate on the basis of the KOF Economic Barometer, the barometer is closely trailed by participants in the financial markets. Barometer readings that are surprisingly high might fortify the Swiss franc, while lower than anticipated readings might debilitate the Swiss franc.

The calculation of the KOF Economic Barometer includes two primary stages. First the factors are chosen, and afterward these factors are combined into one leading indicator.

The initial step comprises of recognizing factors that have hypothetically substantial relationships to the Swiss economy and experimentally settled leading relationship with the reference series in view of month to month Swiss GDP growth (interpolated from quarterly data). The current pool of potential factors comprises of in excess of 500 factors, the specific mix of which changes from one year to another in light of a normalized set of statistical criteria.

The subsequent step is the aggregation of the chose factors into a composite indicator by principal part analysis. The KOF Economic Barometer is generated by separating the primary principle part of the chose panel of factors to capture the co-development in the data, which ought to mirror the Swiss business cycle.

History of the KOF Economic Barometer

The KOF Swiss Economic Institute has distributed the KOF Economic Barometer since the 1970s. The methodology was changed in 1998 and in 2006. The latest updates were made in 2014. In more seasoned variants of the KOF Economic Barometer six to 25 factors were incorporated, in view of data from the Swiss Federal Statistical Office. In the current rendition, adopted in 2014, more than 200 factors enter the subsequent stage. The large number of part factors takes into consideration a stable and robust last indicator. The most recent variant of the Barometer is additionally expected to be more transparent and less inclined to visit update than past forms.

Features

• The current form of the Barometer is built of an aggregate of more than 200 economic factors connected with the Swiss economy.
• Investors and financial traders utilize the KO Economic Barometer to illuminate choices with respect to Swiss investments.
• The KOF Economic Barometer is a composite leading indicator of Swiss GDP growth.