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UBS Consumption Indicator inches lower in July

Zurich / Basel Media Releases Switzerland

The UBS Consumption Indicator moved lower in July compared with the prior month, but it is still at a high level overall. The current indicator reading confirms the view of UBS economists that consumer spending will continue to support the current economic expansion in Switzerland.

The monthly UBS Consumption indicator fell to 1.88 in July, from 2.12 in June and 1.92 in May. Despite the drop, the number is still well above its long-term average of 1.49, indicating that consumer spending should continue its current solid trend.

The downturn in the UBS Consumption Indicator in July was due to sharply lower growth in new car registrations and the slight softening in retail sales, as shown by the latest KOF survey on business conditions in the retail sector.

Despite the drop in the indicator, UBS economists believe that the outlook for consumer spending in Switzerland remains bright overall. Supporting this view is the situation on the labour market, which has shown a positive trend for over a year. Employment was up 0.4% year-on-year in the second quarter, and the increase in job security helped further improve consumer sentiment in July. UBS economists are confident that the boost in confidence going forward and the ongoing strong outlook for the labour market will continue to stimulate consumer spending in the rest of the year. UBS reckons that private consumption will rise by 1.9% in 2006. Gross domestic product overall should grow by 3% for the year.

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 61%, private consumption is by far the most important component of Swiss GDP. The UBS economic barometer is calculated on the basis of five consumer-related indicators: new car sales, business conditions in the retail sector, 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 produced on a monthly basis.


Daniel Kalt

Head Economic & Swiss Research

Tel. +41 44 234 25 60

Karin Schefer

Economic & Swiss Research

Tel. +41 44 234 43 94