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UBS consumption indicator recovers slightly
The UBS consumption indicator rose slightly in March. However, at 0.99, it remains below its long-term average. At its current level, the UBS consumption indicator signals that Swiss consumer spending is continuing to increase slightly. The prospects are, however, becoming increasingly gloomy.
The monthly UBS consumption indicator rose in March from 0.89 to 0.99 and for now has called a halt to the downtrend. Despite the most recent increase, the indicator remains below 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 overnight stays in hotels by Swiss residents; the consumer sentiment index; and the volume of credit card transactions via UBS at points of sale in Switzerland. The slight increase in March is due on the one hand to the 0.8% rise in new car registrations, compared to a year earlier. On the other hand, the somewhat brighter consumer sentiment contributed to the increase. By contrast, the declining number of hotel overnight stays by Swiss nationals in Switzerland and the deteriorating business activity in the retail sector had a negative impact. The latter fell below its longterm average in March for the first time in just under three years.
At its current level, the UBS consumption indicator signals that Swiss consumer spending is continuing to increase slightly. The prospects are, however, becoming increasingly gloomy. In the course of the economic downturn, unemployment is likely to increase significantly in the coming months, which will have a negative impact on consumption tendencies. However, on a more positive note, falling inflation, especially with regard to energy sources, is likely to bolster purchasing power and hence consumer spending. Following a 1.7% real increase in consumer spending last year, UBS forecasts a more modest increase of 0.4% for 2009.
UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-on-year change in %, UBS Consumption Indicator: index level)
Daniel Kalt, Head Economic & Swiss 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