UBS consumption indicator continues to decline
The UBS consumption indicator fell slightly in February. Although at 0.89 it continues to signal some growth in private consumption, it remains below its long-term average for the fifth consecutive month. As a consequence, the prospects for Swiss consumer spending are looking increasingly gloomy.
The monthly UBS consumption indicator fell in February from 0.92 to 0.89 and has thus continued on its downward trend. The indicator remains below its long-term average of 1.50 for the fifth 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 stays in hotels by Swiss residents; the consumer sentiment index; and the volume of credit card transactions via UBS at points of sale in Switzerland. The continued decline in February is mainly due to the dramatic fall in new car registrations, which have fallen by 18.6% compared to the same period last year. Business activity in the retail sector also deteriorated. A slightly brighter consumer sentiment prevented the UBS consumption indicator from falling more heftily. 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 slightly. The prospects are, however, becoming increasingly gloomy. In the course of the economic downturn, unemployment is likely to increase significantly 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 a 1.7% real increase in consumer spending last year, UBS forecasts 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)
Daniel Kalt, Head 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