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UBS Consumption Indicator up sharply in October
The pickup in the UBS Consumption Indicator in September accelerated further in October. The October level of 2.23 is close to the record levels reached in summer and was again well above its long-term average. It thus continues to signal robust growth in Swiss private consumption, which is even likely to accelerate towards year-end.
The monthly UBS Consumption Indicator rose to 2.23 in October, from 2.01 in September and 1.95 in August. It has now exceeded its long-term average of 1.49 for 20 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 overnight stays by Swiss nationals, the consumer sentiment index, and credit card transactions via UBS points of sale in Switzerland. The rise in retail activity and the increase in the number of new passenger car registrations were the primary factors behind the increase in October. New car registrations rose by 13.7% year-on-year, an impressive figure that confirmed the strong trend of the last few months. Another positive contribution came from domestic hotel overnight stays by Swiss nationals. Despite a seasonal month-on-month decline they showed a slight increase year-on-year. Consumer sentiment stabilized at a high level in October, following a drop in the third quarter, thereby providing additional support.
At its current level, the UBS Consumption Indicator signals that Swiss consumer spending remains healthy. The outlook is encouraging. The situation in the labor 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, up 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