UBS Consumption Indicator shows modest decline in March
After a sharp increase in February, the UBS Consumption Indicator pulled back slightly in March. But at 2.29 the indicator confirmed the high level of the previous month, and it is still significantly above its long-term average. As such, it is a sign of continuing solid growth in consumer spending in Switzerland.
The monthly UBS Consumption Indicator stood at 2.29 in March, after 2.32 in February and 2.15 in January. This puts it in the range of last summer's record figures and keeps it above the long-term average of 1.50, which it has exceeded for over two years now.
The UBS Consumption Indicator is calculated from five sub-indicators: new car sales, business activity in the retail sector, the number of overnight hotel stays by Swiss nationals in Switzerland, the consumer sentiment index, and credit card transactions via UBS at points of sale in Switzerland. The decline in March is due particularly to the 9.3% drop in new car registrations compared to a year earlier. The slight deterioration in consumer sentiment also had a negative impact. It should be noted, however, that despite the continuing upheaval in the financial markets the consumer sentiment index is still at a very high level, both in historical comparisons and compared with the US or neighbouring European countries. Factors preventing a steeper decline in the UBS Consumption indicator are the continuing growth in tourism and the improvement in the retail sector, which in March reached its highest level since July 2001.
At its current level, the UBS Consumption Indicator signals that Swiss consumer spending remains healthy. The improved situation in the labour market has led to a sharp rise in employment, and real wages are also likely to rise further this year. Both have a positive impact on disposable household income and should fuel consumer spending in the coming months. Overall, UBS expects real growth in private consumption to reach 2.2% in 2008.
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 61%, 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 the 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.
Daniel Kalt, Head of Swiss Economic Research
Tel. +41-44-234 25 60
Felix Brill, Economic & Swiss Research
Tel. +41-44-234 35 54
UBS publications and forecasts for Switzerland: www.ubs.com/economicresearch