The monthly UBS Consumption Indicator rose to 1.96 in October, up from 1.83 in September and August's interim low of 1.70, and therefore continued to exceed its long-term average of 1.49.

The latest rise in the UBS Consumption Indicator, which is calculated from five sub-indicators, can primarily be attributed to new car registrations, which were up 10% on the previous year. The KOF barometer of business trends in the retail sector and consumer sentiment also helped brighten the picture, remaining practically unchanged at their previous high levels. The fourth indicator, which measures overnight stays by Swiss nationals in Switzerland, continued the growth trend witnessed over the past sixteen months.

The overall pleasing trend recorded by the UBS Consumption Indicator shows that consumer demand among private households continued to develop strongly into late autumn. However, it is not only robust private consumption that is underpinning the economy; other indicators, especially those related to capital spending, also point towards continued strong economic performance. In light of these facts, UBS economists expect gross domestic product (GDP) to rise at an above-average rate through into the final quarter of 2006 and, overall, are anticipating real GDP growth of 3% in the current year. The growth rate is likely to slacken considerably to 1.5% in 2007, however, due mainly to the more muted economic outlook in the US and the eurozone, which looks set to weaken exports for the time being. UBS economists predict that private consumption will prove a valuable pillar of support to the economy in 2007 on the back of positive employment and wage trends and, with around 2% real growth, will help the Swiss economy to sustain a robust level of expansion.

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

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