The monthly UBS Consumption Indicator fell to 1.71 in August from 1.88 in July and 2.12 in June. Despite another moderate drop, the index is still well above its long-term average of 1.49, indicating that consumer spending should continue its current solid trend.

The fall in the UBS Consumption Indicator, which is calculated on the basis of five sub-indicators, was due to low growth in new car registrations, repeating the pattern seen in July. Another negative factor was the softening in retail sales, as shown by the latest KOF survey on the business trend in the retail sector. A moderate decline was seen in comparison to the month before. A strong positive factor in August was the consumer sentiment index, which has recently seen an impressive rise.

Despite the decline observed in the Indicator, UBS economists believe that there is no indication yet of a trend reversal in consumer spending. This view is also supported by employment data, which have shown a positive trend for more than a year. On a seasonally adjusted basis, the unemployment rate has fallen steadily over the last twelve months from 3.8% to 3.4% in August. In addition, surveys indicate an ongoing high recruitment demand from the corporate sector. For example, the jobpilot index of vacant positions reached a level of 126 points in July, thereby clearly overtaking the previous peak reached in the boom period five years ago. UBS economists are cautiously optimistic that increased confidence in the future and the ongoing strong outlook for employment will continue to stimulate consumer spending over the remainder of the year and are forecasting 1.9% real growth in private consumption for 2006. Expectations for GDP growth remain at 3% for the year.

(Private consumption: year-over-year change in %, UBS Consumption Indicator: index level)