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UBS consumption indicator continues to decline

Zurich / Basel Media Releases Switzerland

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)

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 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: