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UBS consumption indicator softens in May
The UBS consumption indicator fell again in May compared to the previous month, but remained nevertheless at a relatively high level. In light of continued positive developments in the labor market, economists at UBS remain optimistic that private consumption will play a supporting role for the economy.
The monthly UBS consumption indicator fell to 1.91 in May. In April, the corresponding figure was 2.16, whereas in March it was 2.25. Despite suffering another downward correction, it still remains above its long-term average of 1.50. This provides further evidence of a solid trend in private consumption.
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 at points of sale in Switzerland. The fall experienced in May is due particularly to deteriorating consumer confidence as well as weaker business activity in the retail sector. In any event, both indicators continue to point towards expansion. The seasonal decline in hotel overnight stays by Swiss nationals has had a mildly negative impact. The remaining indicators are all positive, in particular new car registrations. The latter rose 1.6 % from the previous year.
At its current level, the UBS consumption indicator signals that Swiss consumer spending remains healthy. The encouraging situation on the labor market in particular is having a positive effect in that it reinforces projections for household incomes. Only the most recent hike in inflation was able to dampen the outlook to some extent. However, UBS economists expect inflation rates to subside somewhat as the year progresses. For this reason, UBS expects overall real growth in private consumption to reach 1.8% for the current 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. 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
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