UBS consumption indicator recovers slightly
In December, the recent downward trend of the UBS consumption indicator stopped. However, at 1.15, it remains below its long-term average. As a consequence, the prospects for Swiss consumer spending are looking increasingly gloomy.
The monthly UBS consumption indicator rose slightly in December from 0.96 to 1.15 and has thus halted the downtrend seen in recent months. However, the indicator remained below its long-term average of 1.50 for the third consecutive month.
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 modest recovery in December is attributable to the 5.8% year-on-year increase in the number of new passenger car registrations as well as the seasonal increase in domestic hotel visits by Swiss nationals. However, the deteriorating consumer confidence and the weaker business activity in the retail sector point to a deteriorating propensity to consume. Business activity fell below its long-term average for the first time since May 2006.
At its current level, the UBS consumption indicator signals that Swiss consumer spending is continuing to increase. The prospects are, however, becoming increasingly gloomy. Due to the economic downturn, unemployment is set to rise in the coming months, which will have a negative effect on consumer spending. 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 consumer spending 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 & Swiss Research
Tel. +41-44-234 25 60
Felix Brill, Economic & Swiss Research
Tel. +41-44-234 35 54
UBS publications and forecasts for Switzerland: www.ubs.com/economicresearch