A solid start into 2021 despite second wave of coronavirus - Credit Suisse
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Global CIO Office
Swiss Economics
A solid start into 2021 despite
second wave of coronavirus
Swiss PMI | 04/01/2021, 08:31, UTC
The procure.ch Purchasing Managers’ Index (PMI) for 19 has taken hold in Switzerland and new measures to contain
manufacturing industry indicates that the recovery in the spread of the virus have been implemented, the recovery
Swiss manufacturing is continuing as we head into in manufacturing industry has been maintained as 2020 draws
2021, despite the second wave of Covid-19. Switzer- to a close. The manufacturing PMI has now been consistently
land’s high dependency on exports and the robust inside growth territory since August having slid well below the
conditions in Asia in particular are likely to be proving growth threshold during the first wave of the pandemic, with
advantageous in this regard. the low point for 2020 being set in April at 40.7 points.
While the service sector, which has a greater focus on There are probably two reasons for the sector’s improved
domestic consumption, is experiencing a slowdown, performance versus its showing during the first wave. Firstly,
there is no indication as yet of the kind of slump we unlike in spring supply chains are now running smoothly.
saw in spring 2020. Secondly, north Asia in particular – i.e. China, but also Japan
and South Korea – have got the pandemic under control.
Swiss industry not only benefits directly from demand out of
Claude Maurer Asia, but also indirectly, for example as a supplier to the
Head of Swiss Macro Analysis & Strategy German automotive industry.
A joint project with the Professional Association for Pro-
curement and Supply Management:
PMI (manufacturing)
The procure.ch Purchasing Managers’ Index (PMI) for manu-
facturing industry climbed by 2.7 points in December and, at
a reading of 58.0, is well above the growth threshold of 50
points (see figure 1). This is the highest reading since
September 2018. Even though the second wave of Covid-
Important Information: This report represents the views of the Investment Strategy Department of CS and has not been prepared in accordance with the legal requirements designed
to promote the independence of investment research. It is not a product of the Credit Suisse Research Department even if it references published research recommendations. CS
has policies in place to manage conflicts of interest including policies relating to dealing ahead of the dissemination of investment research. These policies do not apply to the views
of Investment Strategists contained in this report.Figure 1: Manufacturing PMI well above the growth Evolution of the PMI (manufacturing)
threshold PMI PMI (s)
Growth threshold = 50 2019 July 45.1 45.2
70
Aug. 44.7 47.4
65
Sep. 43.4 44.9
Oct. 49.0 48.9
60 Nov. 48.8 48.5
Dec. 47.1 48.8
55
2020 Jan. 47.6 47.8
Feb. 52.0 49.5
50
Mar. 44.7 43.7
45 April 42.1 40.7
May 41.9 42.1
40 June 42.7 41.9
July 48.9 49.2
35
Aug. 48.7 51.8
Sep. 51.2 53.1
30
2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 Oct. 52.3 52.3
Source: procure.ch, Credit Suisse Nov. 55.7 55.2
Dec. 56.0 58.0
Source: procure.ch, Credit Suisse
Index level in December: 58.0 points (November:
55.2)
... and take-up of short-time working is in decline
Month-on-month change: +2.7 points (after rounding) At the same time, the use of short-time working continued
to fall in December according to our additional poll. The
Year-on-year change: +9.1 index points companies surveyed indicated that on average 9% of their
workforce is on short-time working, down on the level of 14%
Workforce is no longer contracting... in the last survey in October. The proportion of those working
There was a broad-based rise in output in December, with reduced hours is less than half the peak level recorded in May
the corresponding subindex hitting 60.0 points, its highest (28%). Conversely, there has been a renewed rise in home
level since September 2018, thanks to a rise of 3.2 points. working. 33% of employees at the manufacturing companies
Delivery times have also lengthened in what is seen as an surveyed work from home, which is almost the same propor-
indication of capacity utilisation. In contrast to the first wave, tion as in March and April and around twice the levels regis-
in which delivery times lengthened because supply chains tered in July and September. One sobering aspect is that
were disrupted, the rise in the corresponding subindex by 5.7 growth in the backlog of orders has slowed compared to the
to 68.2 points can now be viewed as a genuinely positive prior month, although the December reading of 56.9 points
sign. Furthermore, the renewed rise in purchase prices sug- remains clearly in the growth zone. This healthy backlog of
gests a return to higher pricing power across the world and orders points to an increase in output, albeit somewhat dimin-
therefore better capacity utilisation among businesses. The ished compared to the previous month.
corresponding subindex climbed for the second month in
succession and is now back above the growth threshold fol-
lowing a period in which purchase prices had been falling
continuously since March 2019. In another welcome develop-
ment, for the first time since the outbreak of the coronavirus
crisis in February 2020, businesses did not reduce headcount.
On the contrary, the “employment” subindex is actually above
the growth threshold in December, at 52.3 points.
Swiss PMI | 04/01/2021, 08:31, UTC 2PMI (manufacturing) subindices
Index level in December: 49.2 points (November:
higher same lower Index +/– Index +/–
48.0)
(%) (%) (%) (s) (s)
Output 42 34 24 59.2 -0.9 60.0 3.2 Month-on-month change: +1.2 index points
Backlog of or- 40 32 28 55.7 -4.5 56.9 -2.9
ders
Year-on-year change: –2.1 index points
Quantity of pur- 36 41 23 56.6 4.5 60.8 10.6
chases
Purchase prices 22 75 3 59.2 3.6 60.6 4.8 Slowdown – but no slump
Suppliers’ deliv- 4 58 38 67.0 6.8 68.2 5.7
ery times
While the service sector in Switzerland has felt the immediate
Stocks of pur- 22 45 33 44.5 4.8 52.0 9.7 impact of the second wave of coronavirus, so far there is no
chases evidence of a major slump such as that seen during the first
Stocks of fin- 20 53 27 46.3 6.4 50.9 9.4 wave (see figure 2). At 49.2 points, the service PMI is below
ished goods
the growth threshold for the second consecutive month, albeit
Employment 17 66 17 49.7 1.8 52.3 4.7
only marginally thanks to a rise of 1.2 points in December.
The table summarises the results of the latest survey. For each subindex, the table In comparison, the service PMI reached a record low of 21.4
shows the percentage of each response which is “higher than”, the “same as” or “lower points in April 2020. Current measures imposed by the gov-
than” the previous month. The current level of the index is also indicated. The level of
each subindex is the sum of the percentage of “higher” responses plus half of the per- ernment to contain the virus are more moderate in most parts
centage of “same” responses. The PMI is the weighted average (weights in brackets) of Switzerland compared to the restrictions earlier in the year,
of the following subindices: “output” (0.25), “backlog of orders” (0.30), “suppliers’ de-
livery times” (0.15), “stocks of purchases” (0.10) and “employment” (0.20). If the PMI while consumers and service providers are better informed
or a subindex is above the 50 mark this indicates growth, while an index below 50 indi- of how to protect themselves from the virus. This combination
cates contraction.
Source: procure.ch, Credit Suisse
of factors has evidently benefited the sector so far. It is worth
noting that as the survey was conducted between 16 and 18
December 2020, it is unlikely to reflect all the effects of the
Purchasing managers’ index (PMI) survey new measures adopted by the Swiss Federal Council on 18
December to stem rising coronavirus case numbers.
The procure.ch Purchasing Managers’ Index (PMI) is
a collaborative undertaking of the Swiss Trade Associ- Subdued labour market
ation for Purchasing and Supply Management pro- Business activity, which is the counterpart to output in the
cure.ch and Credit Suisse. It is based on a monthly manufacturing sector, actually increased in December – and
survey of procure.ch members. The survey and its at a slightly stronger pace than in the previous month.
evaluation are undertaken in accordance with the Meanwhile, the backlog of orders receded again. While the
guidelines of the International Federation of Purchasing corresponding subindex has climbed 0.5 points, it remains
and Supply Management, which have been tried and clearly below the growth threshold at 45.4. The worsening
tested in the United States for decades. The associa- order situation implies that business activity will contract in
tion procure.ch carries out the survey while Credit the months ahead. The labour market has deteriorated
Suisse evaluates and publishes the results. somewhat, although it is no real cause for concern. While job
cuts have continued, the “employment” subindex is only
marginally below the growth threshold at 49.0 points. That
said, the use of short-time working has increased slightly.
PMI (services) The take-up rate stood at 8% in December, compared to a
low of 6% in October and the peak of 32% in April.
Figure 2: Service PMI still below the growth threshold
Growth threshold = 50
As in the manufacturing sector, December marked the second
80
consecutive month of rising purchase prices, while sale prices
also climbed for the first time since September 2019. More-
70
over, businesses have responded to the call from the Swiss
Federal Council to encourage home working, with 43% of
60
employees in the service sector currently working from home
(compared to a peak of 53% in March and a low of 29% in
50
September).
40
30
20
2014 2015 2016 2017 2018 2019 2020
Source: procure.ch, Credit Suisse
Swiss PMI | 04/01/2021, 08:31, UTC 3Evolution of the PMI (services) PMI (services) subindices
PMI PMI (s) higher same lower Index +/– Index +/–
2019 July 44.2 48.9 (%) (%) (%) (s) (s)
Aug. 50.8 54.9 Business activity 33 41 27 53.0 -3.2 53.0 2.0
Sep. 56.3 55.8 New orders 28 40 33 47.6 -4.8 50.0 2.5
Oct. 56.0 54.5 Backlog of orders 26 38 36 45.1 -6.2 45.4 0.5
Nov. 57.6 52.6 Purchase prices 25 70 5 60.0 4.4 60.8 5.2
Dec. 50.1 51.3 Sale prices 12 81 6 53.1 5.7 52.1 5.5
2020 Jan. 53.6 57.3 Employment 6 82 12 47.0 -2.4 49.0 -0.5
Feb. 52.4 51.9
Mar. 29.2 28.1 The table summarises the results of the latest survey. For each subindex, the table
April 22.1 21.4 shows the percentage of each response which is “higher than”, the “same as” or “lower
than” the previous month. The current level of the index is also indicated. The level of
May 37.2 36.2 each subindex is the sum of the percentage of “higher” responses plus half of the per-
June 48.1 49.1 centage of “same” responses. The PMI corresponds to the weighted average (weights
July 46.3 51.6 in brackets) of the following subindices: “business activity” (0.25), “new orders” (0.25),
“backlog of orders” (0.3) and “employment” (0.20). If the PMI or a subindex is above
Aug. 47.6 51.7 the 50 mark this indicates growth, while an index below 50 indicates contraction.
Sep. 55.6 55.1 Source: procure.ch, Credit Suisse
Oct. 51.9 50.4
Nov. 52.4 48.0
Dec. 48.1 49.2
(28/12/2020)
Source: procure.ch, Credit Suisse
Swiss PMI | 04/01/2021, 08:31, UTC 4PMI (manufacturing) and subindices (seasonally adjusted)
PMI Output Backlog of or- Quantity of Purchase Suppliers’ Stocks of purchases Stocks of finished Employment
ders purchases prices delivery goods
times
2019 July 45.2 44.9 40.1 40.9 48.1 47.1 44.0 54.0 52.3
Aug. 47.4 47.2 47.2 41.5 49.0 46.4 47.7 47.7 48.4
Sep. 44.9 45.1 41.5 37.4 44.4 45.2 44.4 47.2 49.8
Oct. 48.9 49.4 48.9 46.1 48.5 46.3 46.1 44.9 51.5
Nov. 48.5 48.8 47.4 44.2 48.9 46.2 48.3 46.0 51.5
Dec. 48.8 48.8 50.7 42.9 46.2 47.6 45.9 44.4 48.6
2020 Jan. 47.8 46.5 46.5 40.7 47.2 47.9 46.4 48.6 52.1
Feb. 49.5 49.2 45.6 41.2 46.7 55.9 49.9 50.1 51.0
Mar. 43.7 34.5 32.8 38.3 47.2 76.1 52.8 48.4 42.5
April 40.7 28.4 31.8 35.2 45.8 72.8 50.7 49.6 40.5
May 42.1 39.3 35.0 32.6 46.8 56.8 47.8 55.1 42.4
June 41.9 40.4 38.0 36.4 47.6 49.4 51.6 49.0 39.0
July 49.2 53.9 47.8 48.1 49.8 51.3 44.1 44.6 46.6
Aug. 51.8 56.3 53.7 47.7 48.9 51.1 49.2 47.9 45.4
Sep. 53.1 56.4 54.5 44.9 49.6 54.0 50.6 45.9 47.3
Oct. 52.3 55.2 53.1 50.4 49.7 61.2 46.1 44.6 44.1
Nov. 55.2 56.8 59.7 50.2 55.8 62.4 42.3 41.5 47.6
Dec. 58.0 60.0 56.9 60.8 60.6 68.2 52.0 50.9 52.3
Source: procure.ch, Credit Suisse
PMI (services) and subindices (seasonally adjusted)
PMI Business activity New orders Backlog of orders Purchase prices Sale prices Employment
2019 June 53.7 57.7 57.4 50.9 52.3 55.9 48.4
July 48.9 54.6 50.3 44.9 50.8 46.2 46.1
Aug. 54.9 58.0 56.6 53.4 50.7 49.5 51.2
Sep. 55.8 59.9 57.2 53.7 50.7 50.8 51.9
Oct. 54.5 56.3 56.5 51.7 49.2 49.2 53.9
Nov. 52.6 56.9 53.6 50.2 48.2 49.7 49.5
Dec. 51.3 55.3 51.9 48.0 47.7 47.2 50.3
2020 Jan. 57.3 59.5 60.3 54.4 49.3 48.2 55.4
Feb. 51.9 53.0 48.9 52.5 46.6 46.7 53.6
Mar. 28.1 22.4 22.2 25.6 55.0 44.3 46.2
April 21.4 17.4 15.1 17.2 52.4 46.3 40.8
May 36.2 40.8 37.3 31.7 46.7 40.4 36.1
June 49.1 56.0 53.2 46.6 49.8 44.6 39.2
July 51.6 64.0 48.5 49.3 49.4 44.9 43.6
Aug. 51.7 59.2 54.1 48.8 54.0 47.9 43.6
Sep. 55.1 60.6 59.0 53.9 52.7 47.5 45.0
Oct. 50.4 54.2 51.9 49.2 51.8 44.9 45.7
Nov. 48.0 51.0 47.4 44.9 55.6 46.6 49.5
Dec. 49.2 53.0 50.0 45.4 60.8 52.1 49.0
Source: procure.ch, Credit Suisse
Swiss PMI | 04/01/2021, 08:31, UTC 5Risk warning Private Equity
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Imprint Authors
The English translation of Swiss PMI is provided as a Claude Maurer
convenience for our readers. No guarantee is made or implied Head of Swiss Macro Analysis & Strategy
for the accuracy of the translation. Only the original German +41 44 333 41 90
version is authoritative. claude.maurer@credit-suisse.com
Publisher Our partner
Nannette Hechler-Fayd'herbe
Chief Investment Officer – International Wealth Management
+41 44 333 17 06
nannette.hechler-fayd'herbe@credit-suisse.com Andreas Kyburz
procure.ch Director
Information about other Investment Solutions & Laurenzenvorstadt 90
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