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UBS consumption indicator again lower
In July, the UBS consumption indicator continued in its downward trend after following last month's temporary rise. The indicator recorded a level of 0.77, representing the tenth time in a row it has registered below its long-term average of 1.5. The indicator's level hints at a modest expansion in Swiss private consumption.
The monthly UBS consumption indicator fell in July from 0.95 to 0.77. The indicator thus continued the downward trend that began one year ago. The UBS consumption indicator has now registered below its long-term average of 1.50 for ten months.
The UBS consumption indicator is calculated based on five sub-indicators: new car sales, business activity in the retail sector, the number of hotel overnight stays by Swiss nationals in Switzerland, the consumer sentiment index, and credit card sales generated via UBS at domestic points of sale. Nearly all components contributed to this renewed decline in the UBS consumption indicator.
While the indicator's level hints at a modest increase in Swiss private consumption in July, the environment remains difficult. Unemployment is likely to continue to increase significantly in the coming months over the course of the economic downturn, negatively impacting consumption tendencies. Continuing low inflation will likely enhance purchasing power, however, offsetting in part the current slowdown in private consumption. UBS does not foresee a reversal in the trend for the near future and anticipates that consumption will instead continue to decline into 2010. Following last year's 1.7% real increase in consumer spending, UBS is forecasting a more modest increase of 0.4% 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 Economic & Swiss Research
Tel. +41-44-234 25 60
Carla Duss, Economic & Swiss Research
Tel. +41-44-234 21 19
UBS publications and forecasts for Switzerland: http://www.ubs.com/wmr-swiss-research
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