Stability of Consumer Confidence in Kuwait

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

The General Index recorded a ratio of 106 points, with a slight monthly decline of 1 point and down 12 points on an annual basis.

 It is possible to assess and evaluate the results of consumer confidence and their orientations in the current circumstances that affect any country in the world, without scrutinizing the repercussions of global developments on the various security, military, economic, financial and social levels, and the extent to which these affect directly or indirectly various countries of the world. These variables and tensions are reflected in the trends, expectations and level of consumer confidence. This confidence or lack thereof has become one of the important criteria in research institutions and international rating agencies. Based on this, it is necessary to scrutinize the research data and figures to indicate future trends in the local and international markets in order to draw the next developments, admitting that it is almost impossible to forecast future expectations at all levels in most countries.

The sharp impact of the international reality does not negate the importance of internal factors in each country separately and the level of their impact on consumer confidence.

In this context, it is necessary to look at the titles of some economic and financial indicators in Kuwait to discover some internal elements that contributed to the stability of consumer confidence in Kuwait, including:

Kuwait occupied a prominent global position in terms of the level of economic growth in 2022, reaching 8.7% annually.

The Kuwaiti stock exchange achieved significant profits, reaching during the 6 months of the year 1.6 billion dinars, setting a new record.

Limiting the level of monetary inflation in Kuwait to around 3% annually. 

The average price of Kuwaiti oil barrel reached an advanced level during the past month of June, despite the relative instability of prices.

These and other factors contributed to the stability of consumer confidence.

Within this context, citizens granted the General Index a ratio of 99 points, maintaining its previous monthly level, whereas the ratio of Arab residents decreased by 4 points.

As for the governorates, the ratio declined in Al-Ahmadi, Hawalli and Mubarak Al-Kabeer Governorates by 11, 8 and 5 points respectively. While Al-Jahra Governorate has boosted its previous balance by 9 points, Al-Farwaniya Governorate by 7 points and the Capital Governorate by 2 points.

Economic Growth and Consumer Confidence Stability

It is necessary to pause and analyze the phenomenon of inconsistency between the national economic growth in Kuwait and the improvement of oil prices based on successive decisions by OPEC on the one hand and the consumers’ reservation on the other hand, which led to a loss of 1 point from the balance of the Current Economic Situation Index monthly ratio, and a decline in the Expected Economic Situation Index monthly ratio by 4 points. In addition to a noticeable decline in the level of these ratios on an annual basis, as the first ratio lagged by 8 points and the second by 9 points.

If we rely on the current economic and financial conditions in Kuwait, the positive factors behind the decline of these two ratios are not revealed. Therefore, the phenomenon of increasing prices of some commodities and foodstuffs may have negatively affected the psyche of the respondents.

Noting that the headlines of some economic and financial developments in Kuwait confirm the solidity of the financial and economic situation, including:

The average price of Kuwaiti oil barrel in June 2023 reached 76.4 USD, which is 16.4 USD higher than the assumed price in the budget.

Controlling inflation level contributed to the increase in the volume of deposits in Kuwaiti banks and secured their ability to increase investment and consumer lending. The banks also kept the interest rate levels below 5%, while international banks exceeded this percentage with the rise in their inflation risks.

These factors have attracted more additional deposits.

Among the positive indicators:

Kuwaiti oil revenues reached 1.5 billion dinars in June.

This is in addition to the positive expectations for the results of listed companies and stock prices.

In the midst of cloudy global climates and positive internal factors, citizens granted the Current Economic Situation Index 88 points with an addition of 4 points and the Expected Economic Situation Index 106 points with a decline of 2 points. While the ratios’ balance among Arab residents has decreased by 8 and 9 points respectively.

On the regional level, the Current Economic Situation Index in Al-Jahra Governorate increased by 12 points, the Capital by 10 points, and Al-Ahmadi Governorate by 4 points.

While the level of the other three governorates declined, by 14 points in Mubarak Al-Kabeer, by 8 points in Hawalli and 2 points in Al-Farwaniya Governorate.

As for the indicator of the Expected Economic Situation Index, the ratio of youth aged between 18 and 35 declined by 7 points and Arab residents by 9 points.

Moreover, the ratio among the workforce holding a diploma decreased by 17 points, also the ratio for the workforce without intermediate certificate education level decreased by 26 points.

It should be noted that the serious regional and international developments overwhelm the level of confidence in future expectations and this is reflected on the orientations and psyches of consumers, especially among the educationally unskilled workforce.

It is necessary to closely monitor the relationship between the respondents and the economic conditions in the coming months.

Central Bank Policies Preserve Citizens' Incomes

The Current Personal Income Index recorded 87 points, losing 4 points from its monthly balance, and it notably declined by 24 points within a year.

These results raise a legitimate question about the decline in confidence in personal income, taking into account the 2.7% increase in public sector salaries during this period, and controlling the monetary inflation rate at 3% annually. Can the rise in prices of commodities and foodstuffs justify consumer dissatisfaction? Noting that a wide range of essential goods and foodstuffs are subsidized by the state, due to their significant impact on the purchasing value of the dinar under the circumstances of increasing prices.

Important to note the policies of the Central Bank of Kuwait aimed at preserving citizens' income by monitoring, tracking and controlling the variables of the financial and monetary markets, and the volume of their liquidity, encouraging secured lending, securing the conditions for economic growth, ensuring the capitals for state projects and essential strategic sectors, as well as strengthening the public sector to face challenges. 

In light of these economic, financial and administrative developments, the opinions of the research components varied. Whereby, 14 out of 27 components expressed their dissatisfaction with the Current Personal Income. 

Stabilization of the Expected Personal Income Index

The Expected Personal Income Index settled at the previous monthly level, recording 107 points, confirming the increase in confidence of respondents in future expectations. 

The research numbers revealed a clear and sometimes sharp contrast among the components of the research on current income. It seems to be a reflection of the conditions of workers, servers and employees deployed in various economic, service, industrial and commercial sectors, where these immediate differences are embodied in those sectors and their financial capabilities. 

It is necessary to closely follow the issue of income, which is a complex and important matter. 

Recovery of the Labor Market Activity

Ara’s index of Current Employment Opportunities available in the market recorded a ratio of 146 points, up 8 points compared to last June, and lagging by 2 points on an annual basis. Knowing that July 2022 was characterized by a significant return of parts of the expatriate workforce after overcoming the risks and spread of the Corona pandemic, thus the labor market ratio for July 2023 took the first place since November 2022. This data includes a series of indications, perhaps the most prominent of which is the resurgence of demand for employees and workers in Kuwait at the present time, that is, under complex and dangerous circumstances, the developments of which cannot be predicted on all military, political, economic, and security levels. The rise in the level of demand in the labor market simply means the recovery of economic activity and the rise in the level of general economic growth. 

With reference to the increase in the volume and number of workers in Kuwait to an unprecedented number of 2.850 million male and female workers.

Within these prevailing climates, the opinions of the respondents varied in the governorates, as Al-Farwaniya Governorate increased its balance to 195 points, adding 61 points within a month, Hawalli Governorate increased its ratio level to 156 points, exceeding its previous ratio by 27 points, and the various ratios of the remaining four governorates ranged between 39 and 13 points.

 It is noticeable that the rate of Arab residents has increased by 22 points, while it has decreased by 3 points among citizens within a month.

 Positive attitudes were distributed among the ranks of workers. The level of demand increased for employees with university studies, who added 32 points to their previous ratio, and the category of diploma holder employees, increased their ratio by 34 points. The workers with intermediate level of studies were satisfied with an increase of only 5 points, while the rate of high school diploma holders decreased by 5 points.

 In summary, the results indicate a remarkable recovery in the needs of the labor market. 

Unjustified Increase in the Prices of some Materials

 The Purchase of Durable Goods Index recorded a ratio of 108 points, up 3 points within a month, with reference to a decline of 36 points on an annual basis. 

The consumption index occupies an important and distinctive position among the other six research indicators due to its reciprocal interaction with the rest of the indicators.

 Therefore, it is necessary to examine the factors of the monthly rate increase and its annual decline. Some of these factors are: 

1- The level of monetary inflation in Kuwait and accordingly the purchasing value of the dinar: The official references confirm that the annual inflation did not exceed 3%, and this level is considered one of the best global ratios, taking into consideration the tangible international facts.

2- Raising the prices of some commodities and materials by their sources, in addition to the increase in the cost of shipping and securing supply chains which are facing some difficulties, the rise in fuel prices, and the increase in services’ expenses.

3- In addition, a relatively generalized phenomenon has emerged in Kuwait, which is the unjustified increase in the prices of some commodities and foodstuffs. This prompted the Ministry of Commerce to take legal measures, and the Consumer Protection Association is also actively monitoring the increase in prices in Kuwait.

It was also confirmed that a considerable number of consumers contacted the Consumer Protection Association complaining about the increase in prices.

Turn your car into black edition with Lexus Colored Protection

Please Visit The official Instagram account of Lexus Kuwait Here to See all the details.