Consumer Confidence Boosted in Unfavorable Global Conditions

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

The General Index recorded a ratio of 107 points, adding 4 points to its monthly balance and 2 points on a yearly basis.

These points have an important significance due to 2 main factors: 

First: The decline in oil prices since the beginning of the current year, while prices decline sometimes and rise at other times with an unstable activity and in circumstances under which it is difficult to have reliable expectations for the course of oil and gas markets. It also requires OPEC to closely monitor the markets and take the necessary measures that match between supply and demand on the one hand, and seek to balance prices in a way that secures the interests of oil-producing and oil-importing countries on the other hand.

Second: The hotspots in many countries of the world at all levels of political, security and economic tensions, mutual sanctions, as well as the repercussions of inflation and the rise in the level of interest rates and its repercussions on liquidity and money markets and bond prices, in addition to the features of the onset of economic recession in most countries of the world, lead to confusion in many markets, especially in the global banking sector.

All these factors affect directly and sometimes significantly as a result of raising prices and put pressure on the psyche of consumers and consequently the level of ratios of various indicators decline.

Therefore, we must ask about the positive factors that have raised the General Index ratio of consumer confidence in Kuwait.

As long as the international realities are not favorable, it means that the stability or enhancement of consumer confidence is derived from internal factors at the economic, financial and social levels of Kuwait. The most important headings are:

Moody's has announced that Kuwaiti banks function in a solid operating environment.

The policies of the Central Bank proved successful and achieved stability for the banking sector in many crises.

Public confidence has been boosted by OPEC's upcoming meeting and its expected decisions to balance oil prices.

Kuwaiti banks achieved the highest margin of unprecedented profit towards the end of 2022, with solid solvency.

It is natural for this internal development to contribute to rising consumer confidence ratios.

Almost Unanimous in Boosting Confidence in the Economic Situation

The Current Economic Situation Index fortified its previous monthly balance, recording 100 points, by adding 4 points within a month, and declining by 7 points on an annual basis.

There is no doubt that a number of issues and factors have put pressure on many international banks. The most important of which is the raising of interest rates by central banks which led to the risk of low liquidity at some banks and the relative collapse of the prices of some financial stocks. In addition to the exposure of some of these banks in the United States and some European countries to the risk of bankruptcy, forcing the governments of those countries to save them by providing long-term loans or agreeing to merge these banks with other banks in order to restore confidence and secure financial liquidity for depositors.

Noting that the gains achieved, and still being achieved, by the Kuwait Stock Exchange, raised the level of confidence of many customers and businessmen.

Within these climates, Mubarak Al-Kabeer Governorate corrected its previous ratio level of the Current Economic Situation Index, recording 100 points, adding to its previous balance 42 points. Al-Ahmadi Governorate also raised the monthly level to 111 points, adding 18 points within a month.

On the other hand, the Capital decreased by 14 points and Al-Jahra Governorate by 12 points.

The strength of the confidence of young people between 18 and 35 years old is noticeable, as they granted the Current Economic Situation Index an additional 12 points and the Expected Economic Situation Index 20 points, revealing their confidence in the current and expected national economy.

The research also showed a rise of 11 points in the females ratio for the Current Index and 18 points for the Expected Economic Index within a month, while males ratios increased only by 1 point and 12 points, respectively.

26 components unanimously expressed their satisfaction with the Expected Economic Situation Index, raising its ratios in varying positive proportions, and only one component representing a group of respondents over the age of 56, expressed dissatisfaction.

This rare consensus embodies the extent to which consumer confidence and positive convictions about future economic conditions are well established and widespread. This phenomenon reflects the strong conviction among the public opinion about the stability and prosperity of the economic situation in Kuwait.

This does not mean that the atmosphere is free of difficulties, for example:

The repercussions of the international situations and hotspots.

The World Bank expects that the annual growth level of the Kuwaiti economy will not exceed 1.3% during the current year.

But against this backdrop, including the instability of the oil market and the uncertainty of its path, confidence remains high and conditions solid.

These difficulties are offset by many positives, including the gains achieved by the stock exchange and Kuwaiti foreign investments that achieved gains during 2022 amounting to 8 billion dollars.

The current account interest for 2022 increased to 19.3 billion dinars, surpassing the past deficits that affected some annual budgets.

The success of the measures taken by the Central Bank to maintain the exchange rate of the dinar and its purchasing value, which bounces back comfortably on the economic and social levels.

These factors led to a consensus among respondents to increase their level of confidence in the coming economic conditions.

Contradiction in the Level of Personal Income Assessment

Despite the relative stability of the Current Personal Income Index and the Expected Personal Income Index, whereby the first index recorded a ratio of 97 points, up 2 points from its previous monthly rate and a decline of 12 points on an annual basis.

Similarly, the ratio of the Expected Personal Income Index stabilized at 108 points by adding 1 point compared to last April.  However, this ratio was distinguished by  exceeding  the ratio of May 2022 by 3 points.

With reference to the stability of several elements to protect personal income:

1- Government support for foodstuffs and essential commodities, as well as medical, educational, and other life services.

2- Protecting the dinar's exchange rate and its purchasing power.

3- Monitoring the activities of the markets, following up on and checking prices, and holding violators accountable.

These procedures, decisions, and performances among others give practical and psychological support among consumers for a positive assessment of personal income.

In this context, citizens awarded the Current Personal Income Index 108 points by adding 20 points within a month, while on the other hand the ratio of Arab residents decreased by 14 points.

The research results also confirmed that there is a discrepancy in the assessment and in the level of confidence of the various components of respondents. At the regional level, Al-Ahmadi Governorate boosted its previous ratio by 36 points, Mubarak Al-Kabeer Governorate by 22 points and Al-Farwaniya Governorate by 3 points.

While the Capital's ratio has stabilized at its previous level. On the other hand, Al-Jahra Governorate ratio decreased by 34 points and Hawalli Governorate by 8 points.

It is noteworthy that the confidence of the respondents raised the ratio of the Expected Economic Situation Index by 14 points, while at the level of expectations related to Personal Income added only 1 point within a month. 

Decline in Employment Opportunities in the Capital

The Current Employment Opportunities Index ratio stabilized at 127 points, declining 1 point compared to April and 20 points within a year.

These numbers reveal the extent of stability in the demand for the labor force and the volume of the current employment opportunities in the market, and also confirm the stability of the labor market at the same pace since few months.

Positive factors in the financial and economic fields, represented by the continuation of the implementation and planning of projects in the public sector in general and in the field of the oil sector and infrastructure in particular, in addition to the recovery of the real estate sector, including residential, albeit at variable ratios, in addition to some areas of the private sector that grow at acceptable rates, face a lot of pressures resulting from the international situations and military, political and economic conflicts’ hotspots, as well as the difficulties of the supply chains and the repercussions of mutual sanctions.

Within this framework, the labor market stability in Kuwait and its ability to maintain the volumes and pace of its activity can be considered an important achievement.

In these circumstances, the respondents’ opinions vary, as some expressed positively about job opportunities, while others expressed reservations.

It is noteworthy that the 6 governorates were divided into 2 halves, whereby the previous ratios declined in the Capital by 40 points, in Al-Ahmadi Governorate by 22 points and in Mubarak Al-Kabeer Governorate by 14 points, while on the other side of the research, the rest of the ratios enhanced, in Hawalli Governorate by 19 points and Al-Farwaniya Governorate and Al-Jahra Governorate by 11 points.

Drop in Purchase Level

It seems that during May of each year the purchase levels decrease, perhaps due to the preparation for the summer activities and the travel expenses and/or expenses of the various activities within Kuwait. Thus, the Purchase of Durable Goods Index ratio in May stopped at 92 points, down 8 points from its previous monthly balance and equal to the ratio of May 2022.

Noting that the travel expenses of Kuwaitis in 2022 amounted to approximately 4 billion dollars.

On the other hand, the Central Bank of Kuwait extended the housing loans for retirees for seven months in order to increase the level of consumption and secure the needs of retired citizens and encourage them to buy.

The purchasing index ratio among the youth 18 to 35 years old decreased by 24 points, also the males’ ratio decreased by 17 points, while the females’ ratio increased by 4 points.

At the regional level, Al-Jahra Governorate decreased by 58 points, Mubarak Al-Kabeer Governorate by 29 points, the Capital Governorate by 20 points and Al-Farwaniya Governorate by 15 points, while on the other hand, Hawalli Governorate increased its ratio by about 35 points.

The research results indicate a drop in the purchase volume on the one hand and the emergence of a discrepancy between the components of the study as a natural course that has its explanation and justification on the other hand.

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