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UBS consumption indicator: record-high new car registrations show that consumer sentiment is robust
Having risen towards the end of the last year, the UBS consumption indicator remained practically unchanged in January. The undiminished high level of new car registrations shows that consumer sentiment is robust.
Zurich/Basel, 28 February 2012 – The UBS consumption indicator gave way slightly, going from 0.94 points in December to 0.92 points in January. The record number of new car registrations provided strong support to the consumption indicator. Looking at the underlying trend, net of seasonal effects, new car registrations are at their highest level since 1995 (when this statistic was first compiled). The trend is unbroken and continues to point sharply upwards, with car registrations in January increasing 15% compared with the prior year.
The strong franc is likely to be the main driver of this record number of new car registrations, as it has pushed prices down. According to the Swiss consumer price index for January, new car prices were 12.4% below the previous year's level. In contrast to the strong growth in new car registrations, business activity in the retail sector is still hovering at recessionary levels. This divergence seems to indicate that there are winners and losers to the strong franc: Consumers win because their real income increases as prices come down, while the losers include retailers, whose revenues are in decline due to falling retail prices. Their fixed costs (wages and rent) do not fall to the same degree, which puts massive pressure on their margins. UBS is still confident about the private consumption trend and expects the consumption indicator to exhibit an upward tendency in the coming months.
Calculation of the UBS Consumption Indicator
The UBS Consumption Indicator signals private consumption trends in Switzerland with a lead time of about three months of the official figures. At roughly 60%, private consumption is by far the most important component of Swiss GDP. UBS calculates this leading indicator from five consumer-related parameters: new car registrations, business activity in the retail sector, the number of domestic overnight hotel stays by Swiss residents 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 this data is available monthly.
Daniel Kalt, Chief Economist Switzerland
Tel. +41 44 234 25 60
Caesar Lack, Wealth Management Research
Tel. +41 44 234 44 13
Sibille Duss, Wealth Management Research
Tel. +41 44 235 69 54
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research