Slow Decline in Most Consumer Confidence Rates
ARA Research & Consultancy has released its Consumer Confidence Index in Kuwait for September 2023, in collaboration with Arab Times Newspaper and under the sponsorship of Lexus.
Each monthly study of consumer confidence has a specificity that reflects the nature of the phase and its impact on the convictions and behavior of consumers. Based on this fact, it is clear that respondents during September 2023 tended to reduce the level of confidence, even if by slight proportions, on the one hand, and a relative convergence of the positions of the different research components, unlike the wide discrepancies in opinions that have sometimes emerged in previous months. These results reflect the extent of relative stability that experienced by Kuwait.
Within these climates, the General Index recorded a ratio of 105 points, down 3 points within a month and 11 points on an annual basis.
The decline in consumer confidence, even if by a small percentage, may be due to the increase in the prices of some essential goods and foodstuffs, despite official subsidies and strict price controls.
Noting the slight increase in the level of monetary inflation in Kuwait, which touched 3.4% annually, and its negative impact on the purchasing power of the Kuwaiti dinar, which in turn is reflected on the psychology of consumers.
It should be noted that a number of important positive factors were achieved during the month of September; we mention their titles:
The oil market recovery in recent months, achieving important gains, whereby the price of Kuwaiti oil barrel increased in mid-September to 98 dollars, with several expectations that the price may exceed current rates to reach 100 dollars per barrel in the coming months.
These expectations are based on facts:
- The recovery of the economic growth level in China as well as other Asian countries.
- Decrease in the strategic oil reserves in the United States.
- The need for more fuel during the winter season, especially in the European continent.
These facts are supported by the permanent decisions taken by OPEC to ensure market stability and secure the demand in order to balance the law of supply and demand.
These decisions have proven their efficacy during the past months.
In light of this, confidence should return to its high levels.
The confidence study during September 2023 revealed a decline in the level of confidence among those with intermediate certificate, high school degree and those with diploma categories, whereby their General Index rates declined by 12 and 15 points. Looking at those with the lower incomes, it turns out that the equivalent of 4 out of 7 components recorded a decline in the General Index between 6 and 13 points within a month.
Decline in the Two Economic Indicators
The Consumer Confidence research data in September showed a decline in the rate of the Current Economic Situation Index by 3 points, recording 94 points; decreasing 11 points on an annual basis.
Despite recording a ratio of 111 points, the Expected Economic Situation Index declined by 7 points within a month and lost 10 points from its annual balance. Note that the level of decline in the Expected Economic Situation Index is usually lower than the level of decline in the Current Economic Situation Index. So, what are the decline factors in consumer confidence in the two economic situations?
Returning to the financial and economic facts achieved in this period, it showed that the economic results achieved are mostly positive and promising. For example:
a- Fitch Ratings indicated that Kuwait's financial and external budget is exceptionally strong.
b- Oil prices have also increased over the past months, and further increases are expected, noting that this factor occupies a decisive position in the economy of oil-producing countries, especially Kuwait.
c - Kuwait’s commitment to ensuring the necessary investment to develop the oil sector, in contrast to the decline in the level of investment in several countries, including the United States of America.
d- According to the International Monetary Fund, Kuwait ranks among the few countries that have overcome the repercussions of the epidemic and negative international developments, whereby the economic situation in Kuwait has recovered and financial reserves have been strengthened.
So what is the problem between strengthening the economic sector and the decline in consumer confidence?
The answer to this question is the interaction between the economic facts and the respondents.
The decline in consumer confidence in September is due to a number of direct factors:
A- Rise in the prices of foodstuff and necessary consumer goods.
B- A relative increase in the level of inflation, which has a negative impact on purchasing power.
C - The extended geopolitical atmosphere in the region and at the global level.
These factors directly and negatively affect the convictions of consumers and are embodied in their daily lives, while economic achievements and investment projects require time and affect the psyche of consumers on the medium-term.
In this climate, 17 of the 27 research components expressed their dissatisfaction with the current economic situation, and last month’s numbers stabilized among 3 components, meaning that the number of groups that adopted a positive attitude towards this index rates was 7 out of 27 components.
The Personal Income Index Recorded the Third Lowest Ratio in 24 Months
The monthly Personal Income Index is considered the most complex due to the abundance, diversity, and disparity of financial conditions among the various economic fields in general and the differences between the government and private sectors’ salaries in particular.
This objective discrepancy increases due to the specificity of the system of salaries and financial grants to various working citizens, which constitute an important income and a significant share of family expenses.
The hierarchy of the workforce in Kuwait reflected a discrepancy in the level of personal income, and this in turn was reflected as inconsistency in the assessment of income between the various research components.
The Current Personal Income Index registered a ratio of 91 points, a loss of 8 points compared to August, and a decrease in its previous annual balance of 18 points, ranking it the third lowest in years.
In Kuwait, it is not possible to evaluate personal income without taking into account the grants offered to citizens working in the government sector, which amounted to more than three times the value of salaries, within the systems of allowances, incentives, and others.
This is in addition to the subsidies provided by the authorities to purchase commodities, foodstuffs, etc.
For example, the government paid 190 million dinars for food and construction materials within 6 months.
These and other systems indirectly increase the size of personal incomes and their purchasing power, noting that the size of the average annual personal income of citizens increased to 43 thousand dollars, an increase of 150% between 2010 and 2022.
As for salaries, there are wide differences. The salaries’ value of employees in the government sector has doubled in 10 years and jumped from 4 billion to 8.4 billion dinars.
The share of grants and salaries for government employees in the budget has increased to 14.1 billion dinars, or 63% of the total public spending.
Despite the direct and indirect incomes, the decline in the Current Personal Income Index by 8 points and the Expected Personal Income Index by 2 points within a month could be the result of the increase in prices, especially of essential goods and materials. Moreover, the relative rise in interest rates of consumer loans also reflected negatively on the mood of consumers.
Reminding that some companies and institutions in the private sector have not raised the level of salaries and wages in line with the rate of increase in the cost of living.
Declining Demand for Unskilled Labor
ARA’s Current Employment Opportunities Index for the month of September 2023 recorded a ratio of 143 points, increasing its previous monthly rate by 6 points and lagging behind by 7 points on an annual basis.
Comparing the research data, it is clear that the Kuwaiti labour market needs educationally and professionally skilled labour force, contrary to the market's needs for simple workers over the past months.
It is noted that the rate among those with intermediate level of education and below decreased by 27 points, and the balance for those with a secondary school certificate decreased by 24 points within a month. In the opposite direction, the rate of those with university degrees has increased by 16 points.
The follow-up on the Kuwaiti labour market at the current stage reveals the extent of the government and oil sectors’ need for skilled employees. For example:
At the end of March 2023, the official authorities announced the vacancy of 13 thousand jobs ready for contracting, mostly in the educational and health sectors.
Although the public sector absorbed 8.2 thousand new jobs and the government plans to hire 22 thousand employees in the public sector, on the other hand, the volume of the private sector’s demand for the workforce declined during the last six months.
A significant part of citizens worked by establishing small and medium-sized enterprises, relying on facilities and support provided by the government, while a part of the young men and women went to work in the private sector such as banks and large companies.
Enrollment in the Kuwaiti labor market during the six months of the current year by citizens and expatriates reached 86.8 thousand, including domestic workers. On the other hand, the number of expatriates working in Kuwait reached 2.43 million.
This data indicates economic growth in Kuwait.
The rise in the rate of the Current Employment Opportunities Index despite the challenges, indicates further growth in the State of Kuwait.
Inconsistency in Consumption Rates
The Purchase of Durable Goods Index stabilized, increasing its previous monthly balance by one point and recording 96 points.
Differences emerged in consumers' opinions and consumption behaviour. Some research components increased their consumption rates, others reduced the purchase rate, and some of them by high proportions.
At the regional level, the ratios decreased by 45 points in Mubarak Al-Kabeer Governorate and 11 points in the Capital, while confidence in the other four governorates increased between 1 point and 17 points.
The purchase levels among the working groups also decreased, whereby the rates of the workers’ category with below intermediate level of education decreased by 9 points, the secondary level by 24 points and the diploma holders' rate by 42 points within a month, while on the other hand, the confidence of university-level workers increased, strengthening their previous rate by 14 points.
The research data also showed differences in consumption among employees, as some components with low and average level salaries recorded a decline ranging between 17 and 25, and reaching to 39 points from their previous balance.
While the level of the purchase index increased among some respondents, who increased their previous monthly ratio by 63 points.
This discrepancy in consumer opinions and convictions about the level of demand for purchases constitutes a natural phenomenon due to the nature of the stressful period internationally and regionally, as well as the diversity of income levels among various professions and economic sectors.
|