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UBS Consumption Indicator pushes higher
The UBS Consumption Indicator rose again in February, indicating that consumer spending is continuing to grow at a solid pace in Switzerland. In fact, consumption may even tick modestly higher in the first quarter of 2007.
The monthly UBS Consumption Indicator climbed in February to 2.03 points compared with 1.95 in January and 1.89 in December, signalling that the consumer environment in Switzerland is still buoyant and supporting the UBS economists' view that consumer spending will remain a key growth driver.
The UBS Consumption Indicator is calculated from five sub-indicators: new car sales, business activity in the retail sector, the number of domestic overnight hotel stays by Swiss nationals, the consumer sentiment index, and credit card transactions made via UBS at points of sale in Switzerland. The contributors to February's rise were the improved consumer sentiment and the increase in new car registrations, which were up 8.9% year-on-year in February. At the same time, business activity in the retail sector increased versus the prior month, according to the survey results of the Swiss Institute for Business Cycle Research (KOF).
Over the past year the UBS Consumption Indicator has stayed well above its long-term average of 1.49, which augurs that private consumption will remain robust for some time. The strong job market in Switzerland has been a key factor behind the upbeat environment for consumer spending. With capacity utilization rates high and order books full, companies are boosting their spending on expansion and hiring new employees. Along with the increase in employment, rising real wages are also adding to the disposable income for consumption purposes. As a result, households should remain ready to go out and spend. UBS expects private consumption to increase by 2.1% this year following a gain of 1.9% in 2006.
UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-on-year change in %, UBS Consumption Indicator: index level)
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Economic & Swiss Research
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UBS publications and forecasts for Switzerland: www.ubs.com/economicresearch
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