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UBS Consumption Indicator picks up in September
After declining significantly in August, the UBS Consumption Indicator moved slightly higher again in September. Although the current index value of 1.99 is not yet challenging the record levels reached in the summer, it is still well above the long-term average. The indicator therefore continues to signal healthy growth in consumer spending in Switzerland.
The monthly UBS Consumption Indicator rose to 1.99 in September, from 1.95 in August (down from 2.26 in July). It has now exceeded its long-term average of 1.49 for 19 months 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 hotel overnights by Swiss nationals, the consumer sentiment index, and credit card transactions via UBS at points of sale in Switzerland. The rises in retail activity and in the number of new passenger car registrations were the primary factors behind the increase for September. New car registrations rose by 8.5% year-on-year, an impressive figure that underscored the positive trend of the last few months. The decline in hotel overnights by Swiss nationals, partly due to seasonal factors, was one of the reasons why the indicator did not surge more strongly. Another moderating factor was the slight decline in consumer sentiment, although this remains strong by historical standards.
At its current level, the UBS Consumption Indicator signals that Swiss consumer spending remains healthy. The outlook remains encouraging. The situation in the labour market has brightened considerably, and we expect this trend to continue in the coming months. The resulting rise in employment and the expected increase in real wages will have a positive impact on disposable household income, and this should fuel consumer spending in the next few months. Overall, UBS expects real growth in private consumption to reach 2.0% in 2007, from a rate of 1.5% in 2006.
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. 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 of Swiss Economic Research
Tel. +41-44-234 25 60
Felix Brill, Economic & Swiss Research
Tel. +41-44-234 35 54
UBS publications and forecasts for Switzerland: www.ubs.com/economicresearch