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UBS Consumption Indicator surges strongly in February
The UBS Consumption Indicator surged noticeably in February after having declined slightly over the past three months. At 2.32 the indicator is at its highest level in eight months, and keeps running significantly above its long-term average, pointing to robust growth in Swiss private consumption.
The monthly UBS Consumption Indicator stood at 2.32 in February, after revised levels of 2.15 in January and 2.17 in December, thus nearly reaching the record high set last summer. The indicator has now surpassed its long-term average of 1.50 for 24 consecutive months.
The UBS Consumption Indicator is calculated on the basis of five sub-indicators: new car sales, business activity in the retail sector, the number of hotel overnight stays by Swiss nationals in Switzerland, the consumer sentiment index, and credit card transactions via UBS at points of sale in Switzerland. The strong surge in the February reading was attributable primarily to the 12.9% year-on-year increase in the number of new passenger car registrations as well as to improved business activity in the retail sector, which reached its highest level in February since July 2001. The ongoing recovery in the tourism industry also had a positive impact on the indicator, as reflected in the further rise in the number of hotel overnight stays. Somewhat dampened consumer sentiment was the only sub-indicator standing in the way of a more pronounced improvement in the overall UBS Consumption Indicator. However, it is noteworthy that despite the prevailing financial market turbulence, the consumer sentiment index continues to hover at a very high level - by historical comparison as well as relative to the consumer sentiment situation in the US or neighboring Europe.
At the current level, the UBS Consumption Indicator signals that Swiss private consumption is continuing to grow briskly. The positive trend in the labor market has led to a considerable build-up in employment. Real wages too will likely rise further this year. Both these factors have a favorable impact on disposable household income and should underpin consumer spending in the coming months. Overall, UBS therefore expects real private consumption to grow 2.2% in 2008.
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