Swiss Economics

The manufacturing PMI hasrebounded from its slumpSwiss PMI | 03/08/2020, 07:30, UTC

The procure.ch Purchasing Managers’ Index (PMI) formanufacturing industry has reversed its falls during theCovid-induced collapse, while its counterpart for theservices sector is actually pointing towards growth.That said, the recovery in the services sector is runningout of steam.

Although take-up of short-time working continues tofall, the labor market situation remains strained. At thesame time, more than one-third of the businessessurveyed are buying more from Switzerland and theEU as a result of the coronavirus crisis, while almosthalf of companies are planning to do so in future.

Claude MaurerHead of Swiss Macro Analysis & Strategy

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 almost reached the growth threshold of 50points in July (see figure 1). At 49.2 points, it is almost backat its level of February 2020 (49.5 points). Thanks to a

marked month-on-month rise of 7.3 points the collapse inthe index seen in March and April has nearly been clawedback. This means that the manufacturing PMI is actuallyhigher now than it was a year ago.

Figure 1: PMI (manufacturing) close to the growththreshold once againGrowth threshold = 50

30

35

40

45

50

55

60

65

70

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Source: procure.ch, Credit Suisse

Index level in July: 49.2 points (June: 41.9)

Month-on-month change: +7.3 index points

Year-on-year change: +4.0 index points

Global CIO Office

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 designedto promote the independence of investment research. It is not a product of the Credit Suisse Research Department even if it references published research recommendations. CShas 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 viewsof Investment Strategists contained in this report.

Industrial production increasing again...As we have outlined on numerous occasions, the overall PMIis distorted by the change in the “suppliers’ delivery times”subindex. In normal times longer delivery times point to highercapacity utilisation and are therefore a positive sign. The re-sulting increase in the subindex has a positive influence onthe overall PMI due to its weighting of 20%. But since theoutbreak of Covid-19 delivery times have lengthened due tointerruptions to supply. Delivery times now appear to havenormalised, with the corresponding subindex coming in ataround 50 points for the second month in succession. Never-theless, it is also worth taking a look at the “output” subindexto get a sense of the extent of the collapse and recovery inmanufacturing in the year to date (see figure 2). Fortunately,this subindex has now actually returned to growth territory.

Figure 2: Marked rebound in outputGrowth threshold = 50

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30

40

50

60

70

80

2001 2003 2005 2007 2009 2011 2013 2015 2017 2019

Source: procure.ch, Credit Suisse

...but order backlog continues to contractDespite the increase in output, stocks of both finished goodsand purchases declined in July. This is a sign that demandwas higher than originally anticipated. For its part, despitealso rising significantly – by 9.8 to 47.8 points – the “backlogof orders” subindex remained below the growth threshold.Given that the backlog of orders is still in contractionary terri-tory, the rebound in output is likely to be rather sluggish goingforward.

Less short-time workingHeadcount also continued to fall in July, though the decreasein employment was at least at a slower pace than in the priormonth. At 46.6 points, while the “employment” subindex re-mained below the growth threshold, thanks to a marked riseof 7.6 points the gauge hit its highest level since Februarythis year. Moreover, the take-up of short-time working hasdecreased in July, affecting 16% of the workforce accordingto the manufacturing companies surveyed, which is a signifi-cant reduction compared to May (28%) and June (27%).The proportion of employees who are working from homehas also declined. 17% were still working from home in July,down from 20% a month earlier and well below the peak of37% in March.

Every third industrial company hasmodified its purchas-ing proceduresIn addition, around a third of companies stated that they havealready adapted their supply chains as a result of the coron-avirus crisis. Stepping up purchases from domestic supplierswas the most common change cited by the respondents,followed by a shift to suppliers from the EU. In general,companies have also been aiming to diversify their supplierbase more broadly. Indeed, every second company plans torestructure its supply chain in future to focus predominantlyon suppliers from the EU.

Evolution of the PMI (manufacturing)PMI (s)PMI

54.357.1Feb.2019

50.752.1Mar.

49.150.8April

49.048.6May

48.649.5June

45.245.1July

47.444.7Aug.

44.943.4Sep.

48.949.0Oct.

48.548.8Nov.

48.847.1Dec.

47.847.6Jan.2020

49.552.0Feb.

43.744.7Mar.

40.742.1April

42.141.9May

41.942.7June

49.248.9July

Source: Credit Suisse, procure.ch

PMI (manufacturing) subindices+/–Index+/–Indexlowersamehigher

(s)(s)(%)(%)(%)

13.453.98.749.6313830Output

9.847.89.747.7363331Backlog of or-ders

11.748.18.145.7334324Quantity of pur-chases

2.149.82.948.410837Purchase prices

1.951.33.454.5206811Suppliers’ deliv-ery times

-7.544.1-6.146.9275320Stocks of pur-chases

-4.444.6-5.046.9294823Stocks of fin-ished goods

7.646.66.546.9177211Employment

The table summarises the results of the latest survey. For each subindex, the tableshows the percentage of each response which is “higher than”, the “same as” or “lowerthan” the previous month. The current level of the index is also indicated. The level ofeach subindex is the sum of the percentage of “higher” responses plus half of the per-centage of “same” responses. The PMI is the weighted average (weights in brackets)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 PMIor a subindex is above the 50 mark this indicates growth, while an index below 50 indi-cates contraction.Source: procure.ch, Credit Suisse

Swiss PMI | 03/08/2020, 07:30, UTC 2

Purchasing managers’ index (PMI) survey

The procure.ch Purchasing Managers’ Index (PMI) isa collaborative undertaking of the Swiss Trade Associ-ation for Purchasing and Supply Management pro-cure.ch and Credit Suisse. It is based on a monthlysurvey of procure.ch members. The survey and itsevaluation are undertaken in accordance with theguidelines of the International Federation of Purchasingand Supply Management, which have been tried andtested in the United States for decades. The associa-tion procure.ch carries out the survey while CreditSuisse evaluates and publishes the results.

PMI (services)

Figure 3: Service PMI above growth thresholdGrowth threshold = 50

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30

40

50

60

70

80

2014 2015 2016 2017 2018 2019 2020

Source: procure.ch, Credit Suisse

Index level in July: 51.6 points (June: 49.1)

Month-on-month change: +2.5 index points

Year-on-year change: +2.7 index points

The PMI for the service sector has returned to the growthzone in July (see figure 3). At 51.6 points, it has almostreached the level recorded in February this year (51.9 points)and is around 30.2 points above the April low.

Business activity broadly picking upThe business activity subindex, which is the counterpart tooutput in the manufacturing sector, has improved appreciablyfurther with a rise of 8 points in July after climbing by 23.4points in May and 15.2 in June. Accordingly, this subindexis now 46.6 points above its April low, although the pace ofthe recovery is increasingly flattening. Movements in the “neworders” and “backlog of orders” subindices also suggest thatthe recovery will slow going forward, with both trending belowthe growth threshold, albeit only marginally.

Slight improvement in labor market conditionsMoreover, the improvement in the labor market situation hasbeen limited. Staff numbers continue to be cut, albeit at aslower pace at least. The proportion of employees on short-time working has fallen marginally to 18%, which marks amodest decrease from the prior-month level of 20%, althoughit is significantly lower than the April reading of 32%. A thirdof employees at the service companies surveyed are stillworking from home, compared to around half in March andApril.

Rise in purchases from domestic and EU marketsIn line with companies in the manufacturing sector, manySwiss service providers have adapted their supply chainsduring the coronavirus crisis. Around 40% have alreadymodified their supply chains to focus more strongly on pur-chases from the domestic and EU markets. Furthermore,some 40% intend to make similar adjustments in future.

Evolution of the PMI (services)PMI (s)PMI

56.256.7Feb.2019

54.757.8Mar.

59.962.3April

56.157.5May

53.752.7June

48.944.2July

54.950.8Aug.

55.856.3Sep.

54.556.0Oct.

52.657.6Nov.

51.350.1Dec.

57.353.6Jan.2020

51.952.4Feb.

28.129.2Mar.

21.422.1April

36.237.2May

49.148.1June

51.646.3July

Source: Credit Suisse, procure.ch

PMI (services) subindices+/–Index+/–Indexlowersamehigher

(s)(s)(%)(%)(%)

8.064.0-3.951.4323335Business activity

-4.848.5-7.344.4393328New orders

2.849.3-0.144.4334422Backlog of orders

-0.449.41.048.6137710Purchase prices

0.344.92.044.115823Sale prices

4.443.65.145.115796Employment

The table summarises the results of the latest survey. For each subindex, the tableshows the percentage of each response which is “higher than”, the “same as” or “lowerthan” the previous month. The current level of the index is also indicated. The level ofeach subindex is the sum of the percentage of “higher” responses plus half of the per-centage of “same” responses. The PMI is the weighted average (weights in brackets)of the following subindices: “business activity” (0.25), “new orders" (0.25), “backlog oforders” (0.30) and “employment” (0.20). If the PMI or a subindex is above the 50 markthis indicates growth, while an index below 50 indicates contraction.Source: procure.ch, Credit Suisse

(29/07/2020)

Swiss PMI | 03/08/2020, 07:30, UTC 3

PMI (manufacturing) and subindices (seasonally adjusted)EmploymentStocks of fin-

ished goodsStocks ofpurchases

Suppliers’deliverytimes

Purchaseprices

Quantity ofpurchases

Backlog oforders

OutputPMI

57.052.151.453.754.849.353.354.954.3Feb.2019

52.849.250.249.352.147.050.750.150.7Mar.

52.951.351.148.849.546.846.349.049.1April

49.950.553.548.749.748.146.949.149.0May

51.450.551.447.447.143.645.549.748.6June

52.354.044.047.148.140.940.144.945.2July

48.447.747.746.449.041.547.247.247.4Aug.

49.847.244.445.244.437.441.545.144.9Sep.

51.544.946.146.348.546.148.949.448.9Oct.

51.546.048.346.248.944.247.448.848.5Nov.

48.644.445.947.646.242.950.748.848.8Dec.

52.148.646.447.947.240.746.546.547.8Jan.2020

51.050.149.955.946.741.245.649.249.5Feb.

42.548.452.876.147.238.332.834.543.7Mar.

40.549.650.772.845.835.231.828.440.7April

42.455.147.856.846.832.635.039.342.1May

39.049.051.649.447.636.438.040.441.9June

46.644.644.151.349.848.147.853.949.2July

Source: procure.ch, Credit Suisse

PMI (services) and subindices (seasonally adjusted)EmploymentSale pricesPurchase pricesBacklog of or-

dersNew ordersBusiness activityPMI

50.654.357.054.256.462.756.2Feb.2019

52.952.756.753.556.655.954.7Mar.

56.553.256.062.158.561.559.9April

52.951.951.554.059.058.356.1May

48.455.952.350.957.457.753.7June

46.146.250.844.950.354.648.9July

51.249.550.753.456.658.054.9Aug.

51.950.850.753.757.259.955.8Sep.

53.949.249.251.756.556.354.5Oct.

49.549.748.250.253.656.952.6Nov.

50.347.247.748.051.955.351.3Dec.

55.448.249.354.460.359.557.3Jan.2020

53.646.746.652.548.953.051.9Feb.

46.244.355.025.622.222.428.1Mar.

40.846.352.417.215.117.421.4April

36.140.446.731.737.340.836.2May

39.244.649.846.653.256.049.1June

43.644.949.449.348.564.051.6July

Source: procure.ch, Credit Suisse

Swiss PMI | 03/08/2020, 07:30, UTC 4

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documentation provided by CS and/or CSLF. By accepting to invest in theproduct, the investor expressly and irrevocably confirms that he fully under-stands, and has no objection to the use of the English language. Luxembourg:This report is distributed by Credit Suisse (Luxembourg) S.A., a duly authorizedcredit institution in the Grand Duchy of Luxembourg with registered address5, rue Jean Monnet, L-2180 Luxembourg. Credit Suisse (Luxembourg) S.A.is subject to the prudential supervision of the Luxembourg supervisory author-ity, the Commission de Surveillance du Secteur Financier (CSSF). Luxembourg:This report is distributed by Credit Suisse (Luxembourg) S.A., a duly authorizedcredit institution in the Grand Duchy of Luxembourg with registered address5, rue Jean Monnet, L-2180 Luxembourg. Credit Suisse (Luxembourg) S.A.is subject to the prudential supervision of the Luxembourg supervisory author-ity, the Commission de Surveillance du Secteur Financier (CSSF). Mexico:This document represents the vision of the person who provides his/her ser-vices to C. Suisse Asesoría México, S.A. de C.V. (“C. Suisse Asesoría”) and/orBanco Credit Suisse (México), S.A., Institución de Banca Múltiple, Grupo Fi-nanciero Credit Suisse (México) (“Banco CS”) so that both C. Suisse Asesoríaand Banco CS reserve the right to change their mind at any time not assumingany liability in this regard. This document is distributed for informational purpos-es only, and does not imply a personal recommendation or suggestion, northe invitation to celebrate any operation and does not replace the communica-tion you have with your executive in relation to C. Suisse Asesoría and/orBanco CS prior to taking any investment decision. C. Suisse Asesoría and/orBanco CS does not assume any responsibility for investment decisions basedon information contained in the document sent, as the same may not take intoaccount the context of the investment strategy and objectives of particularclients. Prospectus, brochures, investment regimes of investment funds, an-nual reports or periodic financial information contain all additional useful infor-mation for investors. These documents can be obtained free of charge directlyfrom issuers, operators of investment funds, in the Internet page of the stockexchange in which they are listed or through its executive in C. Suisse Asesoríaand/or Banco CS. Past performance and the various scenarios of existingmarkets do not guarantee present or future yields. In the event that the infor-mation contained in this document is incomplete, incorrect or unclear, pleasecontact your Executive of C. Suisse Asesoría and/or Banco CS as soon aspossible. It is possible that this document may suffer modifications without anyresponsibility for C. Suisse Asesoría and/or Banco CS. This document is dis-tributed for informational purposes only and is not a substitute for the Opera-tions Reports and/or Account Statements you receive from C. Suisse Asesoríaand/or Banco CS in terms of the General Provisions Applicable to FinancialInstitutions and other Legal Entities that Provide Investment Services issuedby the Mexican Banking and Securities Commission (“CNBV”). Given the natureof this document, C. Suisse Asesoría and/or Banco CS does not assume anyresponsibility derived from the information contained therein. Without prejudiceto the fact that the information was obtained from or based on sources believedto be reliable by C. Suisse Asesoría and/or Banco CS, there is no guaranteethat the information is either accurate or complete. Banco CS and/or C. SuisseAsesoría does not accept any liability arising from any loss arising from theuse of the information contained in the document sent to you. It is recommend-ed that investor make sure that the information provided is in accordance tohis/her personal circumstances and investment profile, in relation to any par-ticular legal, regulatory or fiscal situation, or to obtain independent professionaladvice. C. Suisse Asesoría México, S.A. de C.V. is an investment advisercreated in accordance with the Mexican Securities Market Law ("LMV"), reg-istered with the CNBV under the folio number 30070. C. Suisse AsesoríaMéxico, S.A. de C.V. is not part of Grupo Financiero Credit Suisse (México),S.A. de C.V., or any other financial group in Mexico. C. Suisse AsesoríaMéxico, S.A. de C.V. is not an independent investment adviser as providedby LMV and other applicable regulations due to its direct relationship withCredit Suisse AG, a foreign financial institution, and its indirect relationshipwith the entities that make up Grupo Financiero Credit Suisse (México), S.A.de C.V. Netherlands: This report is distributed by Credit Suisse (Luxembourg)S.A., Netherlands Branch (the “Netherlands branch”) which is a branch ofCredit Suisse (Luxembourg) S.A., a duly authorized credit institution in theGrand Duchy of Luxembourg with registered address 5, rue Jean Monnet, L-2180 Luxembourg. The Netherlands branch is subject to the prudential super-vision of the Luxembourg supervisory authority, the Commission de Surveillancedu Secteur Financier (CSSF), and of the Dutch supervisory authority, DeNederlansche Bank (DNB), and of the Dutch market supervisor, the AutoriteitFinanciële Markten (AFM). Portugal: This report is distributed by Credit Suisse(Luxembourg) S.A., Sucursal em Portugal (the “Portugal branch”) which is abranch of Credit Suisse (Luxembourg) S.A., a duly authorized credit institutionin the Grand Duchy of Luxembourg with registered address 5, rue JeanMonnet, L-2180 Luxembourg. The Portugal branch is subject to the prudentialsupervision of the Luxembourg supervisory authority, the Commission deSurveillance du Secteur Financier (CSSF), and of the Portuguese supervisoryauthorities, the Banco de Portugal (BdP) and the Comissão do Mercado dos

Valores Mobiliários (CMVM). Qatar: This information has been distributed byCredit Suisse (Qatar) L.L.C., which is duly authorized and regulated by theQatar Financial Centre Regulatory Authority (QFCRA) under QFC License No.00005. All related financial products or services will only be available to EligibleCounterparties (as defined by the QFCRA) or Business Custormers (as definedby the QFCRA), including individuals, who have opted to be classified as aBusiness Customer, with net assets in excess of QR 4 million, and who havesufficient financial knowledge, experience and understanding to participate insuch products and/or services. Therefore this information must not be deliveredto, or relied on by, any other type of individual. Saudi Arabia: This documentis being distributed by Credit Suisse Saudi Arabia (CR Number 1010228645),duly licensed and regulated by the Saudi Arabian Capital Market Authoritypursuant to License Number 08104-37 dated 23/03/1429H correspondingto 21/03/2008AD. Credit Suisse Saudi Arabia’s principal place of businessis at King Fahad Road, Hay Al Mhamadiya, 12361-6858 Riyadh, Saudi Arabia.Website: https://www.credit-suisse.com/sa. Under the Rules on the Offer ofSecurities and Continuing Obligations this document may not be distributedin the Kingdom except to such persons as are permitted under the Rules onthe Offer of Securities and Continuing Obligations issued by the Capital MarketAuthority. The Capital Market Authority does not make any representation asto the accuracy or completeness of this document, and expressly disclaimsany liability whatsoever for any loss arising from, or incurred in reliance upon,any part of this document. Prospective purchasers of the securities offeredhereby should conduct their own due diligence on the accuracy of the informa-tion relating to the securities. If you do not understand the contents of thisdocument, you should consult an authorised financial advisor. Under the Invest-ment Fund Regulations this document may not be distributed in the Kingdomexcept to such persons as are permitted under the Investment Fund Regulationsissued by the Capital Market Authority. The Capital Market Authority does notmake any representation as to the accuracy or completeness of this document,and expressly disclaims any liability whatsoever for any loss arising from, orincurred in reliance upon, any part of this document. Prospective subscribersof the securities offered hereby should conduct their own due diligence on theaccuracy of the information relating to the securities. If you do not understandthe contents of this document you should consult an authorised financial ad-viser. South Africa: This information is being distributed by Credit Suisse AGwhich is registered as a financial services provider with the Financial SectorConduct Authority in South Africa with FSP number 9788 and / or by CreditSuisse (UK) Limited which is registered as a financial services provider withthe Financial Sector Conduct Authority in South Africa with FSP number48779. Spain: This document is a marketing material and is provided byCredit Suisse AG, Sucursal en España, legal entity registered at the ComisiónNacional del Mercado de Valores for information purposes. It is exclusivelyaddressed to the recipient for personal use only and, according to currentregulations in force, by no means can it be considered as a security offer,personal investment advice or any general or specific recommendation ofproducts or investment strategies with the aim that you perform any operation.The client shall be deemed responsible, in all cases, for taking whatever deci-sions on investments or disinvestments, and therefore the client takes all re-sponsibility for the benefits or losses resulting from the operations that theclient decides to perform based on the information and opinions included inthis document. This document is not the result of a financial analysis or researchand therefore, neither it is subject to the current regulations that apply to theproduction and distribution of financial research, nor its content complies withthe legal requirements of independence of financial research. Spain: Thisdocument is a marketing material and is provided by Credit Suisse AG, Sucursalen España, legal entity registered at the Comisión Nacional del Mercado deValores for information purposes. It is exclusively addressed to the recipientfor personal use only and, according to current regulations in force, by nomeans can it be considered as a security offer, personal investment advice orany general or specific recommendation of products or investment strategieswith the aim that you perform any operation. The client shall be deemed re-sponsible, in all cases, for taking whatever decisions on investments or disin-vestments, and therefore the client takes all responsibility for the benefits orlosses resulting from the operations that the client decides to perform basedon the information and opinions included in this document. This document isnot the result of a financial analysis or research and therefore, neither it issubject to the current regulations that apply to the production and distributionof financial research, nor its content complies with the legal requirements ofindependence of financial research. Turkey: The investment information,comments and recommendations contained herein are not within the scopeof investment advisory activity. The investment advisory services are providedby the authorized institutions to the persons in a customized manner takinginto account the risk and return preferences of the persons. Whereas, thecomments and advices included herein are of general nature. Therefore rec-ommendations may not be suitable for your financial status or risk and yieldpreferences. For this reason, making an investment decision only by relying

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on the information given herein may not give rise to results that fit your expec-tations. This report is distributed by Credit Suisse Istanbul Menkul DegerlerAnonim Sirketi, regulated by the Capital Markets Board of Turkey, with itsregistered address at Levazim Mahallesi, Koru Sokak No. 2 Zorlu CenterTerasevler No. 61 34340 Besiktas/ Istanbul-Turkey. United Kingdom: Thismaterial is distributed by Credit Suisse (UK) Limited. Credit Suisse (UK) Lim-ited, is authorized by the Prudential Regulation Authority and regulated by theFinancial Conduct Authority and the Prudential Regulation Authority. Wherethis material is distributed into the United Kingdom by an offshore entity notexempted under the Financial Services and Markets Act 2000 (FinancialPromotion) Order 2005 the following will apply: To the extent communicatedin the United Kingdom (“UK”) or capable of having an effect in the UK, thisdocument constitutes a financial promotion which has been approved byCredit Suisse (UK) Limited which is authorized by the Prudential RegulationAuthority and regulated by the Financial Conduct Authority and the PrudentialRegulation Authority for the conduct of investment business in the UK. Theregistered address of Credit Suisse (UK) Limited is Five Cabot Square, London,E14 4QR. Please note that the rules under the UK’s Financial Services and

Markets Act 2000 relating to the protection of retail clients will not be applicableto you and that any potential compensation made available to “eligible claimants”under the UK’s Financial Services Compensation Scheme will also not beavailable to you. Tax treatment depends on the individual circumstances ofeach client and may be subject to changes in future.

UNITED STATES: NEITHER THIS REPORT NOR ANY COPY THEREOFMAY BE SENT, TAKEN INTO OR DISTRIBUTED IN THE UNITED STATESOR TO ANY US PERSON (within the meaning of Regulation S under the USSecurities Act of 1933, as amended).

This report may not be reproduced either in whole or in part, without the writtenpermission of Credit Suisse. Copyright © 2020 Credit Suisse Group AG and/orits affiliates. All rights reserved.

20C014A_IS

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Imprint

The English translation of Swiss PMI is provided as aconvenience for our readers. No guarantee is made or impliedfor the accuracy of the translation. Only the original Germanversion is authoritative.

PublisherBurkhard VarnholtChief Investment Officer – Swiss Universal Bank+41 44 333 67 63burkhard.varnholt@credit-suisse.com

Information about other Investment Solutions &Products publicationsCredit Suisse AGInvestment PublishingP.O. Box 300, CH-8070 Zürich

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Authors

Claude MaurerHead of Swiss Macro Analysis & Strategy+41 44 333 41 90claude.maurer@credit-suisse.com

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