Consumer confidence resists Covid-19
ARA Research & Consultancy has released its Consumer Confidence Index for February 2020, in collaboration with the Arab Times newspaper and under the sponsorship of Lexus.
The research was conducted in the first week of March, after Kuwait stepped up its measures to curb the spread of the new coronavirus (Covid-19).
The General Index registered 99 points, losing 1 point within a month. It is the lowest ratio in years.
The coronavirus has turned into a global pandemic after its rapid spread across the world. It cost China and many other countries billions of dollars in direct losses until late February 2020, as they tried to combat the virus and limit the losses caused by its spread.
The virus outbreak also led to unspecified losses in industry, labor, cash, services and transportation. In short, the coronavirus has threatened, and continues to threaten, the global economic growth, which will consequently see an unspecified downward impact. These facts, which affected various continents and countries, dealt a severe blow to the global stock exchanges and caused the oil prices to fall dramatically.
It is clear that the virus outbreak did not reach its peak in late February. It continues to spread and is becoming more and more costly to combating it.
Amidst these sudden developments, and in an attempt to keep the oil markets and prices balanced, OPEC held a meeting in early March with other oil exporting countries, most notably Russia, to discuss and approve cutting oil production by about 1.5 million barrels per day.
Depending on what will happen to market activity, and in consistence with the drop in economic activity and the lack of agreement to cut oil output, the oil prices are susceptible to a further fall.
As all countries across the world are scrambling to contain the coronavirus spread and to identify the best scientific ways to overcome it, the Capital displayed concern, with a 7-point drop on the General Index. Farwaniya Governorate also fell 9 points.
The level of confidence of some middle working groups decreased between 11 and 15 points within a month, possibly due to the concern over the labor market future.
Citizens boost their confidence in current economic situation
ARA Current Economic Situation Index recorded 99 points in February, up 4 points within a month.
The citizens also increased their ratio to 107 points, up 8 points within a month.
At the level of governorates, Mubarak El-Kabier exhibited an optimistic tendency and satisfaction with the economic situation by adding 37 points. The Capital and Ahmadi also gained 6 points each, meanwhile, Jahra and Farwaniya dropped 7 and 6 points, respectively.
The stability and rise in the Current Economic Situation Index and the more robust ratios registered by several segments of respondents reflect a positive trend among consumers.
This comes despite the challenges posed by the coronavirus and its repercussions on the stock exchanges, oil prices and the global trade activity. The virus has threatened, and continues to threaten, the global economic growth rate in 2020.
The lowest ratio of economic forecasts
In late February, economic developments and obstacles unfolded, revealing more negative economic expectations. Pressing economic, social and financial repercussions affected all countries across the world, albeit to varying degrees.
Moreover, the production and trade activity shrank and even came to a standstill in some key sectors.
Stock exchanges soon retreated, the oil prices dropped, and the budget deficits swelled in numerous countries, especially oil-producing ones.
Under these tough circumstances, consumer confidence retreated in relation to future expectations. As such, the Future Economic Situation Index posted 96 points, down 6 points within a month and 15 points compared with February 2019. It is the lowest ratio in years.
In this negative atmosphere, the Capital reported 82 points on the Future Economic Situation Index, plummeting 23 points within a month. This draws a general picture of how consumer confidence in the future economic situation has declined.
The current financial developments and faltering economic realities require most governments to adopt stimulating economic policies on the one hand and to address the budget deficits on the other hand.
Variation in assessment of personal incomes
ARA Current Personal Income Index registered 93 points, up 1 point within a month, but down 6 points within a year.
The Expected Personal Income Index posted 102 points, gaining 3 points within a month, but losing 7 points year on year.
The better, albeit slightly, income rates in February versus January is an important indicator of the stability of personal incomes in Kuwait in difficult circumstances at various levels.
Research findings revealed a good level of satisfaction among some respondents. But they also revealed a wide difference among respondents regarding the assessment of personal incomes.
At the level of governorates, Mubarak El-Kabier boosted its ratios on both the current and expected personal income indices with 29 points each. Meanwhile, Ahmadi dipped 24 points within a month.
This disparity emerged among various segments of respondents with regard to personal incomes.
This appears to be normal in such a difficult transition period, as most world countries, including Kuwait, face financial and economic challenges, as well as an expected budget deficit, which may reach unprecedented levels.
Therefore, the respondents reflect the conditions of the professions and the economic sectors in which they work. Where, employees and workers in the government sector are rather satisfied with the stability of their incomes.
New airport to provide 15,000 jobs
ARA Current Employment Opportunities Index registered 122 points, up 10 points within a month, but down 24 points compared with February 2019.
The relative recovery of real estate transactions conducted during 2019, which amounted to 3.7 billion Dinars, helped restore the labor market activity, given that the real estate sector plays an important role in driving a wide range of industrial, commercial and service sectors.
On the other hand, the plan of encouraging small enterprises did not yield the desired results, as many of these enterprises could not implement their programs, which reflected negatively on the availability of employment opportunities.
The government sector in general and the oil sector in particular remain the safest employers, ensuring the continuity of the work of citizens and a large number of expatriates.
In this sense, it is expected that the new airport will provide a total of 15,000 new jobs.
The negative repercussions of the coronavirus on all financial, economic and commercial sectors, including transportation and oil prices, will lead to a decrease in demand for workforce, and the level of employment around the world will drop, even for a temporary period.
Level of consumption among youth down
ARA Purchase of Durable Goods Index scored 92 points, down 15 points within a month and 18 points compared with February 2019.
This decline and the subsequent tumble in the consumer market activity are not justified given a number of facts:
- The volume of credit granted by Kuwaiti banks reached 39.4 billion Dinars at the end of December 2019
- The cash inflation did not exceed 1.5%, thus maintaining the purchasing power
- The Consumer Protection Society has been controlling and monitoring the prices.
In this context, the young people aged 18-35 and the Arab residents lost 26 points each.
However, most segments of respondents expressed a declining tendency to purchase.
At the level of governorates, Farwaniya reported 48 points on the Purchase of Durable Goods Index, a slump of 78 points, followed by Ahmadi, which plunged 26 points.
These were some examples of the research findings that indicate a decrease in the market activity. This drop resulted from the circumstances that weighed on the psyche of consumers.