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Still no sign of recovery in Swiss private consumption
There continues to be no sign of a sustainable recovery in private consumption in Switzerland. Although the UBS consumption indicator managed to stabilize in September, rising unemployment is likely to put a damper on consumer spending in the coming months. UBS economists expect a gradual recovery of consumption in the first half of next year and growth in GDP of 1.7% in 2010 and 2.1% in 2011.
Swiss private consumption remains under pressure, as shown by the UBS consumption indicator, which is calculated on a monthly basis. Although it rose from 0.62 to 0.63 in September, it continues to be well below its long-term average of 1.5. The current level hints only at a modest expansion in private consumption compared to last year.
The UBS consumption indicator is calculated based on five sub-indicators: new car sales, business activity in the retail sector, the number of hotel stays by Swiss nationals in Switzerland, the consumer sentiment index, and credit card transactions generated via UBS at domestic points of sale. New car sales and retail activity helped to stabilize the indicator in September. Stabilization of hotel stays by Swiss nationals is also expected compared to the prior year.
Despite the expected economic recovery, UBS economists forecast a weakening of private consumption in the coming months. In particular, the expected rise in unemployment and the associated job uncertainty are likely to put a damper on consumer behavior. A recovery of private consumption is not foreseen until the middle of next year.
UBS is forecasting growth in GDP of 1.7% for 2010 and 2.1% for 2011. While the contribution of private consumption may well be modest in the coming year, according to the assessment of UBS economic experts, it will again support the economy in 2011.
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 57%, 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, business activity in the retail sector, the number of 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 & Swiss Research
Tel. +41 44 234 25 60
Hans-Peter Hausheer, Economic & Swiss Research
Tel. +41 44 234 67 32
Carla Duss, Economic & Swiss Research
Tel. +41 44 234 21 19
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research