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UBS consumption indicator hits the year's high, but remains below its long-term average
In November, the UBS consumption indicator rose once again compared to the previous month. At 1.28, it reached its highest level since September 2008, although it still remains below its long-term average of 1.5. While this marks a significant improvement in consumer sentiment, the expected rise in unemployment in the coming months is likely to dampen spending again. UBS economists do not expect consumer spending to recover until the second half of next year.
Swiss private consumption continued to gain momentum in November. The monthly UBS consumption indicator rose from 0.88 to 1.28, its highest level since September 2008. While this hints at further expansion of private consumption in the coming months, the indicator still remains below its long-term average of 1.5.
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 residents, the consumer sentiment index, and credit card transactions processed by UBS at points of sale in Switzerland. Only the number of hotel stays - which were affected by seasonal factors - dampened the positive development of the consumption indicator in November. This clearly indicates an improvement in consumer spending.
Despite the gradual economic recovery and the current improvement in the consumption indicator, UBS economists see a risk of a weakening in private consumption in the coming months. In particular, the expected rise in unemployment and associated job uncertainty is likely to put the brakes on consumer behavior. A long-term recovery in private consumption is not expected until the middle of next year.
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.
Carla Duss, Economics & Swiss Research
Tel. +41 44 234 21 19
Hanspeter Hausheer, Economics & Swiss Research
Tel. +41 44 234 67 32
UBS publications and forecasts for Switzerland: www.ubs.com/wmr-swiss-research