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UBS Consumption Indicator up again slightly in October
The consumption indicator calculated by UBS on a monthly basis rose slightly for the second time in a row in October, suggesting that the current economic upturn is likely to continue to be underpinned by solid private consumption.
In October, the UBS consumption indicator reached a value of -0.73, following -0.80 in September and the low of -0.86 recorded in August. Thus the signals are there that, after the momentum of last winter waned temporarily as a result of the global economic slowdown, very solid growth in real private consumption is going to continue. The recent rise in the indicator, made up of five sub-indicators, can be attributed in part to the slightly improved trend in new car registrations compared with the previous year and the renewed increase in the number of overnight stays by domestic guests in Swiss hotels. The consumer sentiment index, which is also taken into account, remained stuck at the level of the previous quarter. The KOF/ETH business sentiment index for the retail trade (our own estimates had to be entered here due to a lack of data at present) and the monthly purchases using credit cards via UBS at points of sale in Switzerland are also included in the calculation of the UBS consumption indicator.
UBS economists anticipate a continuation of the economic recovery, which whilst not explosive when seen from an overall perspective is nonetheless broadly based. Alongside still solid residential construction, the Swiss economy has received additional impetus since early summer from the clear acceleration in exports. In total UBS reckons on average real GDP growth of 1.3% in the current year and 1.6% for the coming year. However, the growth momentum is not strong enough to support significant employment growth. Consequently, only a gradual easing on the job market is likely. As the upturn is broadly based, UBS expects that the Swiss National Bank (SNB) will raise its interest rate target by a quarter of a percent in December. The SNB has already hinted that this will be the case if the upturn continues and the financial markets have largely factored it in.
UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-on-year change in %, UBS Consumption Indicator: Index level)
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