In June, the monthly UBS consumption indicator rose from 0.75 to 0.96, marking a slight recovery following a 12-month downswing. However, the indicator has remained below its long-term average of 1.50 for nine months now.

The UBS consumption indicator is calculated from five sub-indicators: new car sales; business activity in the retail sector; the number of domestic overnight stays in hotels by Swiss residents; the consumer sentiment index; and the volume of credit card transactions via UBS at points of sale in Switzerland. The slight recovery in June is due among other things to a rise in new car registrations and an anticipated rise in the number of overnight hotel stays by Swiss nationals in Switzerland. Nevertheless, year-on-year, the vast majority of components remain distinctly on the decline.

While the indicator's level hints at a modest expansion in Swiss private consumption in June, the future environment remains difficult. In the course of the economic downturn, unemployment is likely to increase significantly in the coming months, which will have a negative impact on consumption tendencies. By contrast, inflation, which remains low, is expected to have a positive influence on purchasing power and should partly cushion the current slowdown in private consumption. Overall, however, UBS does not believe that the recent recovery marks a turnaround and expects the economy to continue shrinking until 2010. Following a 1.7% real increase in consumer spending last year, UBS forecasts a more modest increase of 0.4% for 2009.

Calculation of the UBS Consumption Indicator:
The UBS Consumption Indicator signals private consumption trends in Switzerland with a lead of about three months on the official figures. At 58%, private consumption is by far the most important component of Swiss GDP. UBS calculates this leading indicator from five consumerrelated parameters: new car sales, the business situation in the retail trade, the number of overnight hotel stays by Swiss nationals in Switzerland, the consumer sentiment index and credit card transactions made via UBS at points of sale in Switzerland. With the exception of the consumer sentiment index, all of these data are available monthly.

UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research