By Neil MacLucas

ZURICH--Switzerland's KOF leading economic indicator edged higher in May on signs the country's manufacturers are coming to terms with the negative affects of a stronger Swiss franc.

The index rose 3.3 points to 93.1 in May from an upwardly revised 89.8 in April, data released Friday showed. This was above economists' expectations of 89.6. The April level was originally reported at 89.5.

This is the fourth KOF assessment of business confidence since the Swiss National Bank's move on Jan. 15 to allow the franc to float free of its 3 1/2-year link to the euro.

The SNB's move sent the franc soaring versus the euro, the currency used by Switzerland's biggest export market.

The strong franc tipped the Swiss economy into negative territory in the first quarter, data showed earlier Friday, after 13 straight quarters of growth.

Gross domestic product in the Alpine country fell 0.2% on the quarter, the first contraction since the third quarter of 2011.

The barometer, calculated by the Zurich-based KOF think-tank, forecasts the development of the Swiss economy in about six months' time and suggests growth rates will remain "clearly" below average.

The rise in the indicator "is mainly driven by a recovery of the indicators on Swiss manufacturing activity, with the outlook improving in the metal and the machine building industry, and the electrical and chemical sectors," KOF said.

Still, KOF said in March the Swiss economy could dodge a full-year recession as long as the franc steadies around levels of 1.05 against the euro, but predicts anemic growth of just 0.2% this year.

Write to Neil MacLucas at neil.maclucas@wsj.com