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UBS Consumption Indicator shows modest decline in December
After a sharp increase in November, the UBS Consumption Indicator declined slightly in December. The current level of the Consumption Indicator points to a clearly positive, although still below average, expansion of private consumption. UBS economists expect that rising unemployment will continue to negatively influence consumer sentiment.
After three months of clear increases, the UBS Consumption Indicator posted a slight decline in December: At 1.20, it ended the year slightly under the 2009 high of 1.26 achieved in November. The UBS Consumption Indicator continues to remain below its long-term average of 1.5. Although the current trend is evidence of a robust expansion in private consumption, significant acceleration cannot be expected.
The UBS Consumption Indicator is calculated from five sub-indicators for Switzerland: new car registrations, business activity in the retail sector, the number of overnight stays in domestic hotels by Swiss nationals, the consumer sentiment index, and credit card transactions processed by UBS at points of sale in Switzerland. The increase in new car registrations, the seasonal increase in overnight stays and the improvement in consumer sentiment were not able to compensate for the negative impulses from the two remaining sub-indicators.
The level of the Consumption Indicator indicates a clearly positive, although still below average, expansion of private consumption. Despite the apparent economic improvement, UBS economists are not expecting an acceleration in private consumption in the coming months. The expected rise in unemployment and the associated job uncertainty are likely to continue to put a damper on consumption.
UBS Consumption Indicator and private consumption in Switzerland
(Private consumption: year-over-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.
Caesar Lack, Economic Research Switzerland
Tel. +41 44 234 44 13
Hans-Peter Hausheer, Economic Research
Tel. +41 44 234 67 32
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research