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UBS consumption indicator falls in January
In January, the UBS consumption indicator once again embarked on the downtrend seen in recent months. Although with 0.99 it continues to show positive growth in private consumption, it remains below its long-term average for the fourth time in a row. As a consequence, the prospects for Swiss consumer spending are looking increasingly gloomy.
The monthly UBS consumption indicator fell in January from 1.18 to 0.99, thus resuming the downtrend. The indicator remains below its long-term average of 1.50 for the fourth time in a row.
The UBS consumption indicator is calculated from five sub-indicators: new car sales; business activity in the retail sector; the number of domestic overnight visits in hotels by Swiss residents; the consumer sentiment index; and credit card transactions via UBS at points of sale in Switzerland. The decline in January is mainly due to the striking decline in new car registrations, which have fallen by 17.5% compared to the same period last year. The somewhat brighter consumer sentiment as well as the improved business activity in the retail sector countered a stronger decline in the UBS consumption indicator. The seasonal increase in domestic overnight stays in hotels by Swiss nationals has also made a positive contribution.
At its current level, the UBS consumption indicator signals that Swiss consumer spending is continuing to increase. The prospects are, however, becoming increasingly gloomy. In the course of the economic downturn, unemployment may increase in the coming months, which will have a negative impact on consumption tendencies. However, on a more positive note, falling inflation, especially with regard to energy sources, is likely to bolster purchasing power and hence consumer spending. Following an estimated 1.8% real increase in private consumption last year, UBS forecasts a more modest increase of 0.5% 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.
Daniel Kalt, Head of Economic Research
Tel. +41-44-234 25 60
Felix Brill, Head of Economic Research Switzerland
Tel. +41-44-234 35 54
UBS publications and forecasts for Switzerland: www.ubs.com/economicresearch
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