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UBS consumption indicator continues its downward trend
Since the interim high in June, the UBS consumption indicator has fallen consistently. The distinct adjustment in July was followed by another drop in August to 1.62. At its current level, the UBS consumption indicator still signals that Swiss private consumption is continuing its solid development, but prospects are looking increasingly gloomy.
The monthly UBS consumption indicator again fell significantly in August to 1.62. After the interim high of 2.22 in June, it fell to 1.86 in July. The downturn since June marks the largest adjustment in about six years. Nevertheless, the UBS consumption indicator is still above its long-term average of 1.50.
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 renewed downturn in August is, in particular, attributable to the significant deterioration in consumer sentiment as well as the drop in the number of new passenger car registrations. The latter fell by some 9.7 percent compared to the previous year. The seasonal decline in hotel overnight stays by Swiss nationals has also had a negative impact. By contrast, business activity in the retail sector, which surprisingly posted a significant gain in August, had a positive impact.
At its current level, the UBS consumption indicator signals that Swiss private consumption is continuing its solid development, but prospects are looking increasingly gloomy. The still encouraging job situation, which is likely to have a positive impact on expected household income, continues to give cause for optimism. However, the continuing high level of inflation, coupled with deteriorating economic prospects have tarnished this outlook. Overall, UBS expects real growth in private consumption to reach 1.9 percent 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 58%, 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 Economic Research
Tel. +41-44-234 25 60
Felix Brill, Head of Economic Research Switzerland
Tel. +41-44-234 35 54
UBS publications and forecasts for Switzerland: www.ubs.com/economicresearch