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UBS consumption indicator posts a modest rise but Swiss private consumption remains flat
The UBS consumption indicator rose slightly in October, but this does not represent a trend reversal. The indicator has languished at low levels this year, and with unemployment on the rise, consumption spending is likely to suffer. UBS economists do not expect consumer spending to recover until the second half of next year.
Swiss private consumption remains under pressure, as shown by the monthly UBS consumption indicator. While the index rose modestly in October, from 0.67 to 0.87, it remains below its long-term average of 1.5, indicating a modest increase in private consumption year-on-year.
The UBS consumption indicator is calculated based on five sub-indicators: new car registrations, business activity in the retail sector, the number of hotel overnight stays by Swiss nationals in Switzerland, credit card sales generated via UBS at domestic points of sale, and the new consumer sentiment index of SECO, the State Secretariat for Economic Affairs. Rising new car registrations and improving consumer sentiment stabilized the consumption indicator in October, despite fewer hotel stays by Swiss nationals and declining retail sales.
Despite brightening economic prospects for Switzerland, UBS economists expect private consumption to weaken in the coming months. In particular, the expected rise in unemployment and the associated job uncertainty are likely to dampen consumer behavior. UBS thinks a recovery in private consumption is unlikely before the middle of next year.
UBS forecasts Swiss GDP growth of 1.7% in 2010 and 2.1% in 2011. Although private consumption will probably make only a modest contribution next year, UBS economists expect it to contribute to economic growth again 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, the business situation in 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.
Carla Duss, Economic & Swiss Research
Tel. +41 44 234 21 19
Hanspeter Hausheer, Economic & Swiss Research
Tel. +41 44 234 67 32
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research