By Neil MacLucas
ZURICH--Switzerland's KOF leading economic indicator increased
in July on signs the Alpine country's manufacturers are coming to
terms with the negative effects of a stronger Swiss franc.
The index rose 10.0 points to 99.8 in July from an upwardly
revised 89.8 in June, data released Thursday showed. This was well
above economists' expectations of 90.8. The June level was
originally reported at 89.7, its lowest level in three-and-a-half
years.
The barometer, calculated by the KOF think tank, forecasts the
development of the Swiss economy in about six months' time.
The increase was driven by more positive sentiment in the
country's industrial and manufacturing sector, as well as in the
hotel and catering industries. Indicators that covered banking,
construction and domestic spending were relatively stable, KOF
said.
The reading is the indicator's sixth to fully represent feeling
among Swiss businesses since the Swiss National Bank repealed its
cap on the franc's value against the euro. Since the surprise
decision on Jan. 15, the franc has gained roughly 12% against the
euro, eroding the competitiveness of Swiss exports to the
eurozone.
"While the strong franc continues to place a burden on the Swiss
economy, the first shockwave after the abandoning of the franc's
cap is clearly losing its power," it said.
The appreciation of the franc tipped the Swiss economy into
negative territory in the first quarter, data showed in May, after
13 straight quarters of growth.
Still, KOF said last month 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 0.4% this
year.
Write to Neil MacLucas at neil.maclucas@wsj.com