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Stable consumption thanks to retail sales
The UBS consumption indicator fell slightly in July. The rise in retail business compensated for the drop in new car registrations to some extent.
Zurich/Basel, 28 August 2012 – The UBS consumption indicator posted a slight drop in July, from 1.59 to 1.55 points. As expected, new car registrations fell significantly in July following the record figures for the previous month. The recovery in retail trade nevertheless prevented an even greater decline in the consumption indicator.
The stock of cars increased in June because a CO2 tax was introduced with effect from 1 July, leading to a sharp rise in the consumption indicator. New registrations then fell substantially in July, resulting in the decline in the UBS consumption indicator in that month. Weak figures for overnight stays in hotels by Swiss residents also continued to put pressure on the consumption indicator. A significant improvement in retail trade nevertheless prevented an even greater decline in the consumption indicator.
The current level of 1.55 points means that the consumption indicator is more or less at its long-term average. Differing trends are nonetheless behind this figure. Despite the setback in July, new car registrations are likely to reach record levels this year. On the other hand, business activity in the retail sector and the consumer sentiment index prepared by the State Secretariat for Economic Affairs (SECO) are both below their long-term average. Retailers are suffering from the strong Swiss franc. This makes shopping tourism more attractive and compels retailers to cut prices, both of which results in a decrease in turnover and a squeeze on profit margins after fixed costs have been deducted. With exchange rates stabilizing, UBS expects the situation in the retail sector to improve in the coming months. UBS continues to expect robust economic growth for 2012, with consumption making the largest contribution.
How the UBS Consumption Indicator is calculated
The UBS Consumption Indicator signals private consumption trends in Switzerland with a lead time of about three months on 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, UBS Chief Economist Switzerland
Tel. +41 44 234 25 60, firstname.lastname@example.org
Caesar Lack, UBS CIO Wealth Management Research
Tel. +41 44 234 44 13, email@example.com
Sibille Duss, UBS CIO Wealth Management Research
Tel. +41-44-235 69 54, firstname.lastname@example.org
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research