Oct. 31 (Bloomberg) -- Swiss workers are likely to get a pay increase above the pace of inflation next year as Europe's eighth- largest economy shows signs of strengthening, a survey by UBS AG, Switzerland's largest bank, showed.

Salaries will probably rise a nominal 1.6 percent on average, or 0.6 percent when adjusted for inflation, the Zurich-based bank said, citing a survey among employers across 19 industrial sectors. The government says inflation may average 1.3 percent in 2006.

Swiss labor unions may increase demands for higher wages amid indications that the country's $360 billion economy is picking up and with oil prices above $60 a barrel. The government last week raised the nation's 2006 economic growth forecast to 1.7 percent from the 1.5 percent it forecast in July. Swiss leading indicators rose to the highest in more than a year this month.

``A majority of survey participants were optimistic with regard to future economic development'' and about two-thirds expect ``the moderate economic upturn to hold up in 2006,'' UBS economists including Daniel Kalt said in a statement.

In 2005, Swiss workers covered by wage agreements between labor unions and employers received an average pay rise of 1.6 percent, the government said in August.

Employees in the construction industry will probably receive the highest pay increases in 2006, at 2.5 percent, followed by a 2.2 percent rise among information technology workers and a 2.1 percent gain for pharmaceutical and chemical employees, according to the UBS survey done this month. Workers in print and graphic design will probably win a 1 percent increase.

Many companies may keep hiring plans on hold until they see more signs of a strengthening economy, the survey indicates. Only 18 percent of those surveyed plan to add workers and about half ``do not envision any substantial change'' in 2006, UBS said.

To contact the reporter on this story: Jacob Greber in Zurich at jgreber@bloomberg.net

Last Updated: October 31, 2005 05:41 EST