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Swiss manufacturing PMI edges up in March after franc shock

[ZURICH] The sharp decline in Switzerland's manufacturing sector slowed slightly in March, after the country's factories were stunned at the start of the year by the central bank's decision to scrap its cap on the value of the franc.

The Swiss purchasing managers' index, which gives a snapshot of the health of manufacturers, edged higher to a seasonally adjusted 47.9 points in March from 47.3 points in the previous month, data showed on Wednesday.

This still marks the third month in a row the indicator was below the 50-level, denoting a contraction in activity.

Order books - an indication of future production - also shrank at a slower pace than the previous month, with the sub-index ticking up by 0.4 points, although still remaining in contraction territory.

"The stabilization of the PMI is probably due to the stabilization of the exchange rate," the survey's authors, Credit Suisse and procure, said.

The franc has edged away from its highest level following the Swiss National Bank's removal of its cap on the value of the Swiss currency against the euro in mid-January, a surprise policy U-turn that sent the currency soaring and raised concerns for Switzerland's export-reliant economy.

However the franc, which stood at 1.0443 against the euro on Wednesday, is still trading more than 10 per cent higher than before the January policy move.

"Swiss industry clearly seems capable in the present environment shaped by a global recovery of coping with a EUR/CHF exchange rate below 1.10 and a USD/CHF rate around parity,"Credit Suisse and procure said.

However, the survey indicated that manufacturers still harbor doubts about their futures prospects, leading them to shed staff at the fastest rate since October 2009.

Swiss firms including Julius Baer Cable com, SR Technics, Son ova, Korma and FAG have contributed to more than 1,000 job cuts since the franc cap was abandoned.

The SNB should consider easing monetary policy further to limit a slowdown in economic growth, potentially through pre-announced asset purchases, the International Monetary Fund (IMF) said in March.

The Swiss KEF institute raised its growth forecasts for Switzerland last month and now expects the economy to eke out slight growth in 2015 after dipping into a mild recession for part of the year.


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