What is the 'KOF Economic Barometer'?

The KOF Economic Barometer is a composite indicator that provides a reliable reading on the direction of GDP growth for the Swiss economy compared with the same quarter a year earlier. The KOF Economic Barometer is based on a multi-sectoral design with three modules: core GDP, construction and banking. The barometer has a complex structure because it bundles as many as 20 individual indicators in several steps. It is published monthly by the KOF Swiss Economic Institute.

BREAKING DOWN 'KOF Economic Barometer'

Although the KOF Institute cautions that no conclusions can be drawn about the level of the GDP growth rate on the basis of the KOF Economic Barometer, the barometer is closely followed by participants in the financial markets. Barometer readings that are higher than expected may have the effect of strengthening the Swiss franc, while lower than anticipated readings may weaken the Swiss franc.

History of the KOF Economic Barometer

The KOF Swiss Economic Institute has published the KOF Economic Barometer since the 1970s. The methodology was changed in 1998 and in 2006. The most recent revisions were made in 2014. The current version of the Barometer is based on a reference series computed by KOF. The series is composed of the month-on-month growth rate of Switzerland’s GDP based on the quarterly breakdown of the Swiss Federal Statistical Office’s data by the Swiss State Secretariat for Economic Affairs.

The concept of the barometer is to indicate the stance of the Swiss business cycle, as captured by our reference series, as early as possible.

Calculating the KOF Economic Barometer

The present database consists of more than 400 variables. Two criteria are used to decide which of these variables are included in the barometer calculation. First, the variables must influence the Swiss business cycle. Second, the cross-correlation with the reference series must show a combination of lead and minimum strength.

Based on these variables, an algorithm is repeated every fall. Over 200 selected variables are typically included, but this changes from year to year. In this way, the Barometer "learns" and becomes more flexible.

In March 2018, according to SNBCHF.com, a group that provides insights into Swiss financial markets and the economy, the KOF Economic Barometer fell by 2.4 points to a new reading of 106.0. However, according to the site, this reading is still above the long-term average and is an indicator that the Swiss economy should continue to grow at above average rates.

RELATED TERMS
  1. Barometer Stock

    A barometer stock, or bellwether stock, is considered to be an ...
  2. Consumer Internet Barometer

    The Consumer Internet Barometer is a quarterly survey report ...
  3. USD/CHF (U.S. Dollar/Swiss Franc) ...

    The Swiss franc is the safe haven of foreign currencies, and ...
  4. Gnomes Of Zurich

    Gnomes of Zurich is a disparaging term used to describe Swiss ...
  5. Time Series

    A time series is a sequence of numerical data points in successive ...
  6. GDP Price Deflator

    The GDP price deflator is a system that converts output measured ...
Related Articles
  1. Insights

    Boom-Bust Gauge Predicts Bounce Off Market Highs

    The widely referenced boom-bust barometer predicts that the recent market surge might be premature.
  2. Financial Advisor

    Buying Swiss Francs as a Long-Term Investment: Risks & Rewards

    Learn about the risks and rewards of investing long term in Swiss francs and the history of the Swiss franc's exchange rate against the dollar.
  3. Trading

    Is The Swiss Franc A Safe Haven?

    We examine when and why there are runs on Swiss francs.
  4. Trading

    Why Switzerland Scrapped the Euro

    Why did the Swiss scrap its peg to the Euro and what impact will it have globally?
  5. Tech

    Will Bitcoin Become the new "Swiss Bank Account"?

    As Swiss banks become reluctant to open secret accounts for Americans, some of these banks are turning to Bitcoin as a workaround measure.
  6. Investing

    Why Swiss Watch Sales are Plummeting (UHRN)

    Sales of Swiss watches have plummeted over the last year due to a broad range of factors
  7. Investing

    This Central Bank Owns U.S. Equities Worth 20% of GDP

    Discover more about Swiss National Bank's holdings of financial assets, and look into its recent accumulation of foreign equities.
  8. Insights

    Be Afraid! Volatility & Fear Measures Back to Brexit Levels

    Safe-haven assets on the rise as volatility increases and geopolitical tensions grow.
RELATED FAQS
  1. What is GDP and Why Is It So Important To Investors?

    The gross domestic product (GDP) is one the primary indicators used to gauge the health of a country's economy. What does ... Read Answer >>
  2. Why is Switzerland considered a tax haven?

    Learn how Switzerland is considered a tax haven, even though its government has signed agreements to disclose information ... Read Answer >>
  3. Is real GDP a better index of economic performance than GDP?

    Learn why real GDP is a better index for expressing the output of an economy, as it takes into account the factors that distort ... Read Answer >>
  4. What are these points that the Dow is always gaining or losing?

    Points on the Dow represent dollars and show whether the stocks of the 30 companies that make up the index went up or down ... Read Answer >>
Trading Center