Rise in Ratios of Most Consumer Confidence Indexes in Kuwait

ARA Research & Consultancy has released its Consumer Confidence Index in Kuwait for August 2023, in collaboration with Arab Times Newspaper and under the sponsorship of Lexus.

Consumer confidence studies are gaining more importance in most countries worldwide for shedding light on the real, on ground situation at various levels. Furthermore, the results of consumer confidence have transformed into a real direct criterion to observe the impact of security, political, and economic variables in various countries, as the external factors interact with the internal ones in all countries of the world.

These intertwined factors have imposed severe pressure on the level of central banks’ rising interest rates, who are trying to reduce levels of monetary inflation, which leads to repercussions on the level of investments’ expansion and a decrease in the direction of capital for real production. This difficult confrontation leads, in a number of countries, to a decline in the level of economic growth, lower levels of consumption, as well as lower levels of demand for the labor force.

This social-financial-economic model imposed a decline in the expected level of global production, in addition to the growing decline in consumption ratios due to increasing prices. As for the State of Kuwait in this regard, consumer confidence is stable and rising from one month to the next. This phenomenon is limited to few countries, while levels of confidence are declining in most countries, albeit to varying degrees.

The Kuwaiti achievement, which has been embodied in the stability and increase in consumer confidence ratios over the past months, depends primarily on various positive elements, the most important of which are:

The increase in oil prices, even if it faced some relative declines resulting from the general climate and risks and obstacles at the international level, and specifically due to the decline in global growth expectations. 

In addition to the reality of the largest oil importing country, the People's Republic of China, due to the shrinking level of global trade and the increasing volume of China's oil reserves.

In addition to its suffering from difficulties in one of the most important economic sectors, i.e. the real estate sector. Nevertheless, the returns on oil sales have overcome these difficulties and OPEC is preparing to take the necessary measures to balance supply and demand in global oil markets.

Moreover, the rise in the levels of deposits and the increased profits of Kuwaiti banks contributed to supporting the monetary situation, as well as strengthening and raising the level of consumption. Also, the increase in Kuwaiti foreign investment income, which amounted to 2.3 billion dinars during the first quarter of this year, constituted one of the financial and monetary pillars of the State of Kuwait.

Decline in Both Economic Ratios in the Capital

The Current Economic Situation Index recorded a ratio of 98 points in August, boosting its previous monthly ratio by two points and declining by 3 points on an annual basis.

It seems that the research components were close in their judgment on the extent of their confidence in the current economic situation, so the numbers were close with the exception of some categories, for example: 

Economic ratios declined in the Capital, as it lost 13 points from its previous monthly ratio for the first index and six points from the Expected Economic Situation Index.

 It is clear that a number of the study’s ratios for the month of August dropped between a maximum of 21 points and a minimum of 2 points. The traditional summer season expenses may have put pressure on the psychology of the respondents. Accordingly, we must follow up on the results of the next research to see the respondents’ direction.

At the governorates level, four governorates recorded positive results with an increase  of 12, 11, 2 and 1 positive point, respectively, while in addition to the Capital, Al-Farwaniya Governorate took a negative position, decreasing its previous ratio by two points.

 It is necessary to point out the fact that the Current Economic Situation Index ratio for those with a monthly income exceeding 2,850 dinars per month decreased by 21 points, and in contrast, the category with an intermediate education certificate and below increased its monthly balance by adding 38 points.

Boosting Confidence in the Expected Economic Situations

The Expected Economic Situation Index recorded a ratio of 119 points, strengthening its previous ratio by 7 points. This result reflects the extent of the respondents' satisfaction and their confidence in the upcoming positive expectations. This situation did not come out of a vacuum, but rather was based on solid future facts and expectations, including: 

The project and plan prepared by the Kuwaiti government for achievement within a program until 2030, brings with these projects an increase in the level of Kuwaiti daily oil production to 3.5 million barrels starting the year 2025.

The conclusion of the financial market results, i.e., the Kuwaiti Stock Exchange, proved its ability to face challenges, its flexibility in dealing with developments  and its ability to achieve a growth of 26%, which is equivalent to 1.8 billion dinars in half a year.

Kuwait has ranked tenth among the countries with the most energy reserves.

Kuwaiti bank profits grew by 48% in the first half of the current year.

These examples and other field data formed a stable basis for the increase in consumer confidence in future expectations.

Increase in the Personal Income Ratios

Addressing and evaluating the issue of personal income is organically linked to the specificity of each country separately, as well as the regulations and laws related to individual incomes, and the tax law.

The specificity of Kuwait in this regard clearly stands out through its policies of providing a number of grants to citizens working in the government sector. As an example of this:

The data and figures issued by the Kuwaiti Ministry of Finance indicate that it granted, during 2022 - 2023 fiscal year, an amount equivalent to three times the salaries for employees and workers in the government sector as allowances, remuneration and grants worth 5.59 billion dinars, while the value of wages reached 1.65 billion dinars.

Noting that the rate of financial inflation, which increased last July to 3.75% on an annual basis, has slightly reduced the purchasing power of the Kuwaiti Dinar. As a result, the prices of education, medicine, and some food commodities have increased, affected by monetary inflation on one hand, and the rise in prices, transportation expenses, and insurance costs from sources on the other hand.

Within this atmosphere, high ratios were recorded at the regional level in all governorates except for the Capital, whose ratio for the first indicator, Current Personal Income Index decreased by 18 points and Expected Personal Income Index by 2 points. While the other five governorates increased by high ratios that ranged between 30, 26, and 23 points, down to 13 and 10 points. This means that there is almost unanimity in the governorates regarding satisfaction and contentment with regard to the current and expected personal income.

Decreased Youth Confidence in Employment Opportunities

The Current Employment Opportunities Index ratio has declined to 136 points, losing 9 points in a month and 10 points on an annual basis.

It is noteworthy that despite the various initiatives taken by both the public and private sectors, as well as the oil and banking sectors, to organize vocational training courses to raise the educational level among young people, the Current Employment Opportunities Index recorded 155 points among the youth, losing 23 points from its previous monthly balance and 10 points on an annual basis.

The phenomenon of the decline in the available job opportunities index among the youth (between 18-35 years old) needs to be assessed and evaluated either negatively or positively based on two criteria. The first: a comparison with the monthly and annual rates where it has dropped by 23 and 10 points respectively, which indicates a negative result. While, if we adopt another scale, which is recording 137 points for August, this level is considered higher than the annual average rate for this indicator. This means that youth have not lost their confidence in employment opportunities, but rather it has decreased from the previous level.

It is notable that the rate of university degree-holders has decreased, losing 46 points within a month, and on the other hand, the demand has increased among unskilled workers who have enhanced their previous balance by 71 points.

The labour market is going through transitional phases and we must follow its developments.

Decrease in Consumption Level

ARA’s Purchase of Durable Goods Index recorded a ratio of 95 points for the month of August 2023, decreasing by 14 points within a month, with a loss of 33 points on an annual basis.

The ratio declined among the 27 research components as follows:

16 components showed a decline in their purchasing, one component maintained its ratio within a month and 10 components increased their purchasing level at varying proportions.

Did the requirements and expenses of the summer season, including the travel of citizens, residents and their families who spend the summer abroad, lead to a decrease in consumer market activity, or are there other factors?

Several factors have contributed to the decline in market activity. In addition to the summer season and rising inflation, there are additional external factors putting pressure on consumption, including the rise in prices of foodstuffs, goods, and some services. An example of this is the increase in the cost of goods transportation, insurance policies, and others.

Within this atmosphere, the Kuwaiti Minister of Commerce announced the issuance of several measures to guarantee the supplies, foodstuffs, and stocks necessary to ensure food security.

On the other hand, tightening control over price movements and ensuring consumer rights.

Perhaps international developments on all levels contribute to reducing prices and securing food, as well as the continuity of implementing measures taken internally to control, as much as possible, the prices of foodstuffs, goods and essential services.

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