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UBS consumption indicator trends sideways in October
The UBS consumption indicator was quoted at 1.54 points in October, suggesting that private consumption is growing at a solid pace in the fourth quarter. A weaker Swiss franc and a drop in unemployment provide support for it, but rising inflation and the accompanying stagnation of real wages are likely to cap any growth in it.
Zurich, 29 November 2017 – The UBS consumption indicator inched up to 1.54 points in October from a corrected September figure of 1.51. New registrations for passenger cars and domestic tourism shored up the indicator. By contrast, the index of consumer confidence measured by the State Secretariat for Economic Affairs stagnated. In October it was -2 points, virtually unchanged from the previous quarter's -3. Although consumers assess the labor market more positively, expectations with regard to the general economic situation have become slightly gloomier.
UBS projects growth in private consumption at 1.3% both for this year and for next, marginally below its long-term average. The weaker Swiss franc is benefiting Swiss retailers indirectly by making shopping outside the country more expensive for consumers. The economy is also likely to be buoyed in the coming year due by Europe's strong economic showing. This could lower unemployment and further underpin consumption. But the recently published UBS Compensation Survey indicates stagnating real wages for this year and next, which should prevent a greater upturn in consumption.
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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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UBS publications and forecasts for Switzerland: www.ubs.com/cio-swiss-views