UPDATE 1-Swiss factories expand for first time since Aug 2011

Fri Feb 1, 2013 5:05am EST

* Swiss PMI index rises to 52.5 points

* Survey suggests euro zone demand is improving

* Order backlog points to rising production in coming months (Adds analysts, details)

ZURICH, Feb 1 (Reuters) - Swiss manufacturing grew for the first time in 17 months in January, suggesting companies were benefitting from a fall in the franc and that demand in the crisis-hit euro zone was improving.

The Swiss purchasing managers' index rose to a seasonally adjusted 52.5 points in January from a revised 49.2 points in the previous month, data showed on Friday, beating forecasts for a reading of 50.5 points.

It was the first time the indicator had risen above the 50 mark, which separates growth from contraction, since August 2011.

"Today's PMI is the continuation of a fairly positive trend as the Swiss economy avoids recession and maintains relative strength even through the worst effects of the euro zone debt crisis," said Tony Nyman, an analyst at Informa Global Markets.

Swiss exporters, hurt by the strength of the safe-haven franc since the start of the financial crisis, have welcomed the weakening of the currency to a 22-month low against the euro last week as confidence returns to the euro zone.

Data on Friday showed euro zone factories had their best month in nearly a year during January, adding to signs that the worst may be over for the troubled currency bloc.

More than half of Swiss exports are sold in the euro zone and indications that the currency bloc is on track to return to growth will be a boost for Swiss factories.

The backlog of orders component in the PMI index rose 3 points to 57.9 points in January, suggesting further increases in production can be expected, the survey's authors Credit Suisse and procure.ch said.

"The renewed increase in the backlog of orders component is a vote of confidence that the Swiss economy will pick up some speed again in coming months," said VP bank economist Thomas Gitzel.

Still, the data contrasts with a fall in the closely watched KOF barometer of Swiss economic sentiment to its lowest in eight months in January, hit by worries that much of Europe will struggle to generate growth for the foreseeable future.

Analysts have suggested the KOF may have painted too rosy a picture in the past and is now playing catch-up with other leading indicators, like the PMI.

"The KOF is broader and is giving the opposite signal, but the PMI has better matched the GDP profile in recent quarters," said Janwillem Acket, an economist at Julius Baer. (Reporting by Caroline Copley and Martin de Sa'Pinto; Editing by Patrick Graham and Susan Fenton)

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