Consumers upbeat about economy

Analysts say that with an improved economy, consumers are more likely to spend Keystone

The Swiss consumer sentiment index has risen to its highest level in five years, improving to +12 points in July from +7 points in April, beating analysts' forecasts.

The State Secretariat for Economic Affairs (Seco) said on Thursday that Swiss households were especially upbeat about the economic outlook, but were concerned about their income.

Results from Seco’s quarterly survey of 1,100 households in July for the three indicators making up the index revealed a mix of opinions.

When asked what they thought of the economy’s performance during the previous 12 months, most of those polled gave a positive assessment for the third time in a row. This indicator rose from 15 to 34 points.

Households were less satisfied with their personal budget situation over the same period, considering they were worse off financially with the indicator falling from –2 to –7.

People did however believe that their income would increase in the next year, moving upwards from seven points to ten.

The overall result was better than analysts polled by the Reuters news agency had expected, with a median forecast of +10.8 points.

Experts welcomed the survey’s findings. “The general assessment of the economy has improved substantially and this is good for consumption,” said Julius Baer bank analyst Janwillem Acket.

Economic growth

Consumer sentiment mirrors most recent economic growth forecasts. The survey showed that more households thought the economy would continue to improve over the next year.

The Swiss National Bank said last month that the outlook was extremely good, while most sectors of the economy said they were “very satisfied” with business.

The consumer index published by UBS, Switzerland’s biggest bank, also reached its highest level in five years.

According to figures released on Thursday by debt collection agency Creditreform, the number of new companies in Switzerland increased by 1.3 per cent during the first six months of the year, while the number of bankruptcies fell by 4.6 per cent.

The latest unemployment figures confirm the economic surge.

The job market has been able to absorb the arrival of new graduates, with the jobless rate remaining at 3.1 per cent. Once seasonal factors are taken into account, unemployment in July actually fell for the 11th straight month.

“With unemployment remaining at low levels, consumers are more likely to go out and spend,” said Délia Nilles of Lausanne’s Créa economics institute.

Some of the other answers submitted for the Seco survey painted a less optimistic picture. People are still concerned about job security, although this indicator rose from –72 to –47 points, in line with the long-term average.

Most households said that they felt prices had risen in the past 12 months and would continue to do. The average level of savings remains modest, while the tendency to make major purchases stayed under the long-term average.

swissinfo with agencies

Key facts

Swiss economic growth forecast 2006:

State Secretariat for Economic Affairs: 2%
Swiss National Bank: 2.5%
UBS: 3.0%
Credit Suisse: 2.8%
Swiss Institute for Business Cycle Research (KOF): 2.1%
BAK Basel Economics: 2.7%
IMF: 2.2%
OECD: 1.75%