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UBS Consumption Indicator still on the rise
The consumption indicator calculated by UBS on a monthly basis rose slightly for the second time in a row in December, a signal that solid growth in real private consumption is going to continue.
The UBS Consumption Indicator climbed to -0.62 in December, from a November level of -0.69 and an interim low of -0.92. This signals continued solid growth in real Swiss consumer spending, which has been gaining momentum since the beginning of 2005 and was even up 2.1% year-on-year in the third quarter. The latest rise in the UBS Consumption Indicator, which is made up of five sub-indicators, can be attributed to the continuing uptrend in new car registrations and the increase in the number of hotel overnight stays by domestic guests in Switzerland. The consumer sentiment index, which is also factored in, remained stuck at the level of the previous quarter. The KOF/ETH business sentiment index for the retail trade (our own estimates had to be used here due to a lack of data at present) and monthly credit card purchases via UBS at points of sale in Switzerland are also included in calculating the UBS Consumption Indicator.
Prospects for the Swiss economy are therefore still bright at the beginning of 2006. UBS economists expect broad-based economic growth to continue. While the export sector in particular is likely to remain a major driver, the ongoing firming of private consumption and a significant surge in equipment spending should also make large contributions to this trend. With this in mind, the Swiss National Bank is likely to stick to its tighter monetary course for the time being. UBS economists anticipate a further rate hike in March.
UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-on-year change in %, UBS Consumption Indicator: Index level)
Zurich / Basel, 24 January 2006