Swiss Economic Prospects 'Gloomy', Foresees UBS Indicator

by Ulrika Lomas, Tax-News.com, Brussels

08 July 2009

The UBS Swiss consumption indicator continued to fall in May, below its long-term average. UBS surmised that although the indicator suggests Swiss consumer spending is slightly rising, prospects for future months are becoming ‘increasingly gloomy’.

The UBS consumption indicator, which is calculated monthly, fell in May from 0.91 to 0.77, thereby continuing its downward trend. The indicator has thus remained below its long-term average of 1.50 for eight consecutive months now.

The UBS consumption indicator is calculated from five sub-indicators: new car sales; business activity in the retail sector; the number of domestic overnight stays in hotels by Swiss residents; the consumer sentiment index; and the volume of credit card transactions via UBS at points of sale in Switzerland.

According to UBS, the decline in May was chiefly due to the decline in new car registrations, which were down 15.3% compared to the same period last year, and to gloomy consumer sentiment. The seasonal decline in the number of domestic hotel overnight stays by Swiss nationals also had a negative effect, while improving retail sales offset this somewhat.

In the course of the economic downturn, UBS anticipates unemployment to increase significantly in the coming months, having a negative impact on consumption tendencies. On a more positive note, falling inflation, especially with regard to energy sources, is likely to bolster purchasing power and hence consumer spending. Following a 1.7% real increase in consumer spending last year, UBS forecasts a more modest increase of 0.4% for 2009.

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