The downward trend of the UBS consumption indicator continued in July. It fell by 0.23 points to a level of 1.29 – its lowest level since December 2009. Poor performance in the retail sector and declining consumer sentiment were responsible for the drop. Countering this trend were the strong number of new car registrations and the increase in overnight stays in hotels by Swiss residents.

The UBS consumption indicator is calculated from a range of sub-indicators. Currently, clear divergence is apparent between the sub-indicators that are based on subjective and those based on objective assessments. The two subjective sub-indicators, consumer sentiment (collected by SECO) and business activity in the retail sector (collected by KOF), both declined last month and were lower than the long-term average. However, this negative view is not supported by the objective sub-indicators: The number of overnight stays in hotels by Swiss residents rose slightly in the first six months of the year and was nearly on par with the record level in 2008, while the number of new car registrations has already exceeded its pre-crisis level by a considerable margin.

The negative mood can be explained by the crisis reports that have repeatedly emerged in recent months from Europe and the United States. In the past, however, sentiment indicators in Switzerland have not been particularly good economic indicators. UBS therefore still expects robust growth in private consumption of 1.6 percent for this year.

UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-on-year change, in %; UBS Consumption Indicator: index level)

UBS AG

Contact:

Daniel Kalt, Chief Economist Switzerland
Tel. +41 44 234 25 60

Caesar Lack, Economic Research Switzerland
Tel. +41 44 234 44 13

Sibille Duss, Wealth Management Research
Tel. +41 44 235 69 54

UBS publications and forecasts for Switzerland:
www.ubs.com/wmr-swiss-research