UBS consumption indicator hits the year's high, but remains below its long-term average

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.

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