Decline of All Consumer Confidence Indexes

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

It is noteworthy that the ratios of all indexes have decreased by rates ranging between 3 and 8 points. The General Index recorded a ratio of 99 points, down 5 points compared to February, and its annual ratio dropped by 7 points, bringing the General Index of March 2023 to its lowest level in 2 years.

This reality imposes on us to refer to the economic and financial data in Kuwait and address the international and regional developments at all levels to analyze the extent of their negative impact on the level of consumer confidence in Kuwait during this period.

The headlines of the economic situation in Kuwait that emerged during March, are as follows:

1-The leap achieved by Kuwait's foreign currency reserves within a month, which amounted to 1.2 billion Kuwaiti Dinars, bears an encouraging connotation due to the global competition to attract capital by raising interest rates in central banks.

2- Protecting the purchasing power of the Kuwaiti Dinar and controlling the level of national monetary inflation within its economically acceptable limits.

3- The increase in bank deposits by the private sector, which amounted to 674.4 million Dinars within 2 months.

4-The remarkable growth of the Kuwaiti economy is confirmed by the increase in demand for manpower.

5- The role of the Central Bank of Kuwait in ensuring stability and safety in facing financial shock waves in some countries, especially in the United States of America and Switzerland, and their repercussions on most countries around the world.

6- In the current circumstances, oil markets tend, albeit at a slow rate, to boost their prices, thus strengthening the financial base in Kuwait.

7- The continuity of investment in the oil sector policy by the official authorities in Kuwait during a stage of decline in the volume of capital for this sector in some other countries.

In contrast to these positive headlines, there are challenges and difficulties that put pressure on the economic situation in Kuwait, such as:

1- The difficulties faced by the Stock Exchange from time to time, which sometimes lead to losses and some anxiety.

2- The external challenges at various levels that put pressure on the situations of various countries of the world:

 A- The military and political conflict in Ukraine and its repercussions on various levels of supply chain obstruction, especially foodstuffs and reciprocal sanctions, which have raised prices in an unprecedented manner.

B- Raising interest rates in some central banks in the world in order to reduce inflation, which led to shrinking of liquidity and accumulation of capital in some countries, against its dangerous atrophy in developing countries.

The return of high inflation levels, as happened in Lebanon, Iran, Turkey, Egypt, Syria and other developing countries in addition to the United States and European countries, albeit at different rates.

These overlapping and conflicting factors and others have created a global climate of anxiety and uncertainty. The pace and speed of changes complicate the prospecting of facts in order to reach firm expectations.

In this climate, 3 of the 27 components of the research showed confidence, giving the General Index between 6 and 10 positive points, while 24 components showed their worry and distrust with the current consumption conditions.

Near Complete Dissatisfaction with the Economic Conditions

The Current Economic Situation Index recorded a ratio of 93 points, with a loss of 5 points within a month. It is noteworthy that 24 of the 27 components expressed their dissatisfaction with the current economic situation, while the Capital alone increased its previous balance to 117 points, adding 34 points within a month.

It seems that the international reality pressuring the financial markets in the world affected the Arabian Gulf stock exchanges, including the Kuwaiti market, which imposed some challenges and losses sometimes on the Kuwait Stock Exchange, despite the scientific performance and modern methodology that developed the foundations of advanced regulatory work in the stock exchange.

Moreover, oil prices have relatively dropped, which is expected to be dealt with by OPEC in early April, but the drop in the price of oil has put pressure on markets on the one hand and on the morale of consumers on the other hand.

As for the categories according to the level of their salaries, the category of employees with salaries between 2250 and 2849 Dinars per month recorded a ratio of 47 points with a loss of 40 points within a month, and the ratio of workers with a secondary educational level decreased, recording a ratio of 90 points with a decline of 24 points within a month.

Noting that the arrival of the month of Ramadan in March imposes traditional expenses on the respondents that may contribute to pressure on the budget of some consumers and affect their morale.

Youth Trust the Expected Economic Situation in Kuwait

The Expected Economic Situation Index registered 105 points, dropping by 2 points in a row on a monthly and annual basis. 

Youth between 18 and 35 years old registered a ratio of 125 points, boosting their previous monthly balance by 18 points.

At the regional level, the Capital boosted the Expected Economic Situation Index to 118 points by adding 37 points. It is noted that the Capital increased the rates of 4 indexes by high ratios, reflecting the satisfaction of its respondents and their confidence in the expected situation in the future.

One of the drivers for boosting confidence may be the recovery of Kuwait's current economic growth and increased demand for workforce, reflecting the recovery of some key sectors.

It is natural that growth rates, monetary inflation and other surprises reflect negatively or positively on the conditions of public opinion and on their convictions and requirements.

Therefore, it is necessary to carefully follow up on the events, their trends, their repercussions, the level and manner of their effect on the various regions, especially in the economic and food fields.

Perhaps the circumstances help to reach the best conditions, it is necessary to follow up on the situations in the path of consumers’ confidence.

Variation in Assessing Personal Income

The Current Personal Income Index scored 92 points, down 4 points within a month and 8 points compared to March 2022.

Prominent in the research data is the extent of variation in the evaluation of this indicator, some examples:

Among the age groups, 18 to 35 years old increased their previous ratio by 9 points, while among the 35 to 55 years old it decreased by 10 points and for the older than 55 years old it decreased by 34 points. Similarly, citizens added 13 points to their previous balance, while Arab residents’ ratio dropped by 20 points.

At the regional level, opinions on Current Personal Income varied, as the research component in the Capital expressed its satisfaction with the Current Personal Income Index by adding 45 points within a month, Mubarak Al-Kabeer Governorate added 16 points and Al-Jahra Governorate 1 point. While on the other hand, the balance of the other three governorates decreased: Al-Ahmadi Governorate by 30 points, Al-Farwaniya Governorate by 20 points and Hawalli Governorate by 11 points.

This discrepancy in the rates among the components of the study is due to a number of reasons, including: At the governorate level, demographic and occupational diversity, as the phenomenon of discrepancy in the assessment of income between different age groups is primarily due to the quality of the labour market need. The higher the demand for a specific group, its confidence in personal income and business continuity automatically increases.

As for the Expected Personal Income Index, its rate, like the rest of rates in March 2023, was negative, scoring 99 points, down 7 points on a monthly basis and 5 points on a yearly basis.

Noting that Kuwait's economic and financial offerings can create a positive atmosphere for future expectations despite all obstacles.

The Lowest Employment Opportunities Index in Two Years

The Current Employment Opportunities Index was limited to 115 points dropping by 7 points on a monthly basis and by 28 points compared to March 2022.

This decline in the labour market activity was expressed by 16 of the 27 components of the research, while two components maintained their previous rates. Thus, only 9 categories of those who participated in the research expressed a positive opinion about the future expectations for job opportunities.

Citizens added 8 points while Arab residents’ ratio dropped by 30 points.

At the regional level, the ratio of Hawalli Governorate increased by 11 points and Mubarak Al-Kabeer Governorate by 6 points, while the rate stabilized in Al-Farwaniya Governorate. On the other hand, the rate dropped in 3 governorates: Al-Jahra Governorate decreased its previous balance by 76 points, Al-Ahmadi Governorate by 14 and the Capital Governorate by 7 points.

Among workers, the Current Employment Opportunities Index declined by high rates, some of which exceeded 62 points reaching 33 points.

These high negative figures bear an unusual connotation that must be followed up and the reasons for this decline are discovered, pointing out that the decline in demand in the labour market may be a natural corrective reaction after the successive rise in the pace of demand for the labor force in recent months.

Negative Mood Affects the Consumption Index

When the Purchase of Durable Goods Index is at 96 points in March, down 9 points within a month and 11 points on a yearly basis, its third-lowest level in two years, questions should be asked about the reasons for this decline.

Kuwait's economic and financial fundamentals, including the Dinar's purchasing power, tightly controlled price controls, and the recovery of some economic sectors, can at least maintain last month's level of consumption. This prediction raises a legitimate question: Is the negative mood that affected most of the components of the research the cause? Or are there other reasons for the decline in trust?

It is necessary to answer these and other questions and follow up on the path of consumption activity in the coming months due to its importance in the entire economic and social cycle.