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UBS Consumption Indicator still on the rise

Zurich / Basel | | Media Releases Switzerland

The consumption indicator calculated by UBS on a monthly basis rose slightly for the third month running in November. Due to the persistently solid economic trend, UBS is raising its growth forecast for Switzerland.

The UBS Consumption Indicator improved slightly in November to -0.71, following on from the -0.73 recorded in October and the erstwhile low of -0.83 in August. The index therefore rose for the third month running in November, signalling continued solid growth in real private consumption. The latest rise in the indicator, which is made up of five sub-indicators, can be attributed 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 used 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.

The Q3 GDP growth figures published by the State Secretariat for Economic Affairs (seco) were surprisingly strong, and the growth rates for the first two quarters of 2005 were also revised sharply upwards. Against this backdrop, UBS economists now expect real GDP growth of +1.9% on average for 2005 as a whole (previous forecast: +1.3%). The broad-based growth momentum is also likely to persist initially in the coming year, and the GDP growth forecast for 2006 has therefore been revised up from 1.6% previously to 2.0%. In addition to ebullient export and consumer demand and persistently strong construction activity, increasing business investment is also on the cards for the coming year. The growth impetus from these factors will have an increasingly positive impact on employment. UBS therefore expects to see the unemployment rate drop from an average of 3.8% in 2005 to 3.5% next year.

UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-on-year change in %, UBS Consumption Indicator: index level)

Revised economic forecasts for Switzerland

Real GDP growth (% yoy)

2003

2004

2005

2006 F

Old forecast (September 2005)

-0.3

2.1

1.3

1.6

New forecast

-0.3

2.1

1.9

2.0

Inflation (%)

Forecast (unchanged)

0.6

0.8

1.2

0.6

Unemployment (in %)

Old forecast (September 2005)

3.8

3.9

3.8

3.7

New forecast

3.8

3.9

3.8

3.5


Zurich / Basel, 27 December 2005
UBS