UBS consumption indicator: Problem child in retail
The UBS consumption indicator registered at 1.50 points in March, indicating private consumption growth around the long-term average. Solid automotive demand drove this figure. Domestic tourism, on the other hand, took a breather after a strong start in 2017. Pessimism still prevails in retail.
Zurich, 26 April 2017 – The UBS Consumption Indicator stood at 1.50 in March, and the February figure was revised downwards slightly to 1.45. Following strong growth at the beginning of the year (5.5%), domestic tourism fell by 0.8% in February compared with the same month in the previous year. New car registrations, on the other hand, increased by 4.8% compared with the previous year. A sour mood prevails among retailers, according to a survey conducted by the Swiss Economic Institute (KOF) at ETH Zurich. The sentiment index traded at –9 in March and was below the long-term average of 4.5 for the 32nd month in succession. It seems that the hoped-for adjustment by the retail sector to the new exchange rate realities is only taking place very slowly. The strong franc and the associated price disadvantage compared with competitors from border countries is not the only challenge facing the retail sector. The spread of online shopping is also pressuring Swiss retailers, so UBS economists are not expecting retailers' mood to brighten soon.
UBS predicts GDP growth for the Swiss economy of 1.4% in the current year. Even if economic growth is not likely to rise much, it should be more broad-based than last year. UBS economists are expecting solid consumption growth. A slight fall in Swiss unemployment should support consumption, whereas the increase in inflation will exert a braking effect as rising consumer prices will lead to lower growth in real income.
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Sibille Duss, UBS Chief Investment Office WM
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Alessandro Bee, UBS Chief Investment Office WM
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