Switzerland’s Purchasing Managers’ Index (PMI) for manufacturing in August reported a score of 49.0. This is above the expected 46.9 and shows a slight rise from 48.8 in the previous month. Even though this shows a bit more activity, the manufacturing sector is still below the important 50.0 mark, meaning it has contracted for 32 months in a row. Business confidence has remained stable despite ongoing tariffs and market changes.

August PMI Gains in Production

The higher PMI in August came from an increase in production, which rose to 55.4 — up by 5.8 points. New orders also improved slightly, reaching 45.2 with a gain of 1.3 points. On the downside, employment conditions worsened, dropping to 46.4 — a decline of 2.4 points. This highlights ongoing issues in the labor market for this sector. The Swiss manufacturing PMI for August 2025 exceeded expectations, but we see this as a weak positive sign rather than a turning point. The sector’s ongoing contraction emphasizes serious weaknesses in the Swiss economy. Therefore, any early strength in the Swiss Franc (CHF) after this report should be viewed cautiously. This economic weakness, particularly the drop in employment, will likely keep the Swiss National Bank (SNB) adopting a cautious approach. The SNB has already reduced its policy rate twice in 2025, in March and June, lowering it to 1.00% due to declining global demand. This PMI report supports the view that additional rate hikes are unlikely for the rest of the year, as indicated by interest rate futures.

Opportunities for Relative Value Trades

For equity markets, the data is mixed, presenting chances for relative value trades. The recovery in production is a plus for industrial stocks within the Swiss Market Index (SMI), but the ongoing contraction is a challenge for the overall market. We might look at buying call options on specific industrial exporters while purchasing index puts on the SMI for protection against the wider economic downturn. With the conflicting internal indicators and external risks from tariffs, uncertainty is expected to grow. The Eurozone, Switzerland’s biggest trading partner, recently saw its manufacturing PMI drop to 48.5, indicating that regional weakness continues. This scenario suggests it may be wise to buy volatility through options, such as straddles on the EUR/CHF currency pair, to prepare for potential sharp movements in the following weeks. Create your live VT Markets account and start trading now.

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