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Private consumption experiencing slower growth
After a slight increase in September, the UBS consumption indicator noticeably fell in October. At 1.32, it dropped below its long-term average value for the first time in two and a half years. The outlook for private consumption in Switzerland is thus becoming increasingly dim.
The monthly UBS consumption indicator significantly fell from 1.64 to 1.32 in October. Following a slight increase in September, the indicator thus continued its declining trend of previous months, falling below the year-long average of 1.50 for the first time since April 2006.
The UBS consumption indicator is calculated based on 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 as well as credit card sales generated via UBS at domestic points of sale. The significant decrease in October can be particularly attributed to further diminishing consumer sentiment and the declining number of hotel overnight stays by Swiss nationals in Switzerland. The number of new car registrations as well as business activity in the retail sector remained practically unchanged. In a long-term perspective, the latter can still be considered to be good.
At the current level, the UBS consumption indicator still signalizes growth in Swiss private consumption, but the outlook is becoming increasingly dim. In the course of the economic downturn, unemployment is expected to increase in the months ahead, which will have a negative impact on consumption. A more positive aspect is declining inflation, particularly with regard to energy prices, which is protecting purchasing power and thus supporting private consumption. Overall, UBS is anticipating a 1.9% real growth in private consumption in 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