UBS Consumption Indicator shows consumer demand deteriorated in September
UBS still expects consumption to grow robustly in the coming quarters.
After a six-month climb, the UBS Consumption Indicator decreased significantly in September, falling by 0.25 points to 1.70. In August, it reached a level of 1.95. The drop is partly due to declining business in the retail sector. Furthermore, although new car registrations in September were still 5.3% above the previous year's level, in August the growth was 11.9%. Finally, even the momentum of domestic overnight hotel stays by Swiss residents declined.
Most of the sub-indicators used to calculate the Consumption Indicator are very volatile, thus making the Consumption Indicator itself subject to random fluctuations. The latest decline thus does not necessarily represent a turning point.
We expect that consumption will continue to grow robustly in the coming quarters. Low interest rates and an improvement in the labor market, as well as the ongoing strong increase in the permanent resident population, should continue to support private consumption. For 2010 as a whole, UBS expects growth in private consumption of 1.8%, and 1.7% for 2011. The Consumption Indicator's current level of 1.70 thus precisely reflects our expectations for this year's consumption growth.
The UBS Consumption Indicator is calculated from five sub-indicators: new car registrations, business activity in the retail sector, the number of domestic overnight stays in hotels by Swiss residents, the consumer sentiment index and credit card transactions via UBS at points of sale in Switzerland.
UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-on-year change, in %; UBS Consumption Indicator: index level)
Caesar Lack, Swiss Economic Research
Tel. +41 44 234 44 13
Daniel Kalt, Chief Economist Switzerland
Tel. +41 44 234 25 60
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research