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UBS Consumption Indicator up sharply in June
After a steady slide since February, the UBS Consumption Indicator recovered significantly in June. The gain of 0.3 points to 2.25 marks the largest monthly increase since April 2007. At its current level, the Indicator signals that Swiss consumer spending remains healthy.
The monthly UBS Consumption Indicator rose to 2.25 in June, up from 1.95 in May and 2.15in April. This latest rise sees the UBS Consumption Indicator not only outstripping the average for the past twelve months, but puts it above its long-term average of 1.5 for two years running.
The UBS Consumption Indicator is calculated from five sub-indicators: new car sales, business activity in the retail sector, the number of overnights made by Swiss nationals in domestic hotels, the consumer sentiment index, and credit card transactions via UBS at points of sale in Switzerland. The Indicator's sharp rise in June is due in particular to the significantly improved business activity in the retail sector, as well as the increase in hotel overnights by Swiss nationals. The former is once more nearing the record values seen at the start of the year. In addition to sales, business activity in the retail sector probably benefited from the UEFA European Championship. That the Indicator did not rise even more reflects the slight worsening in consumer sentiment and, in particular, the fall in new car registrations, which are down 4.6% from a year ago.
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 has been 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