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UBS consumption indicator falls further
The UBS consumption indicator continued to fall in May. At 0.77, it remained below its long-term average. At its current level, the UBS consumption indicator suggests that Swiss consumer spending is still rising slightly. Its prospects are, however, becoming increasingly gloomy.
The UBS consumption indicator, which is calculated monthly, fell in May from 0.91 to 0.77, thereby continuing its downward trend. The indicator has thus remained below its long-term average of 1.50 for eight consecutive months now.
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 decline in May was chiefly due to the decline in new car registrations, which were down 15.3% compared to the same period last year, and to gloomy consumer sentiment. The seasonal decline in the number of domestic hotel overnight stays by Swiss nationals also had a negative effect, while improving retail sales offset this somewhat.
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. 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)
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.
UBS publications and forecasts for Switzerland: www.ubs.com/economicresearch