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UBS consumption indicator continues to soften
The UBS consumption indicator softened further in November. At 0.96, it was at its lowest level since March 2005 and remained under its long-term average value for the second time in a row. The outlook for private consumption in Switzerland is thus continuing to worsen.
In November, the monthly UBS consumption indicator fell further from 1.32 to 0.96, its lowest value in three and a half years. It confirmed the downward trend since the middle of the year and the indicator remains under its long-term average of 1.50.
The UBS consumption indicator is calculated from five sub-indicators: new car sales, business activity in the retail sector, the number of domestic overnight stays in hotels by Swiss residents, the consumer sentiment index and credit card transactions via UBS at points of sale in Switzerland. The heavy decline in November can be traced to a weakening of all five sub-indicators. While the decline in domestic overnight stays in hotels by Swiss residents is seasonal, 16% less new car registrations compared to the year before and the fall of the consumer sentiment index both point to a decline in the propensity to consume. Although business activity in the retail sector has remained above its long-term average, even here the downward trend is continuing.
At its current level, the UBS consumption indicator signals that Swiss consumer spending will continue to grow. However, prospects are becoming increasingly dim. In the course of the economic downturn, unemployment may increase in the coming months, which will have a negative impact on consumption tendencies. On the other hand, it can be positively noted that declining inflation, particularly with regard to energy, is supporting purchasing power and thus private consumption as well. After a presumed real growth in private consumption of 1.8% in 2008, UBS is counting on a modest 0.5% increase for 2009.
UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-on-year change in %, UBS Consumption Indicator: index level)
Calculation of the UBS Consumption Indicator:
The UBS Consumption Indicator signals private consumption trends in Switzerland with a lead of about three months on the official figures. At 58%, private consumption is by far the most important component of Swiss GDP. UBS calculates this leading indicator from five consumer-related parameters: new car sales, the business situation in the retail trade, the number of overnight hotel stays by Swiss nationals in Switzerland, the consumer sentiment index and credit card transactions made via UBS at points of sale in Switzerland. With the exception of the consumer sentiment index, all of these data are available monthly.
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