Political developments put pressure on all consumer confidence indices
ARA Research & Consultancy has released its November 2019 Consumer Confidence Index in collaboration with the Arab Times newspaper and under the sponsorship of Lexus.
The General Index scored 104 points, down 4 points within a month and 8 points within a year, reflecting a decline in five of the six indices that comprise the research.
Based on the findings for November at all levels, the main reason for the drop in consumer confidence is that of internal political developments, embodied in the dispute between the parliament and the government.
The relationship between the parliament and the government is one of the most significant aspects of democracy in Kuwait. When this relationship is harmonious, with parliament playing its role in legislation, control, and accountability, and the government planning and implementing its duties, this is reflected in political performance and fortifies and develops the existing financial and economic situation. This is directly manifested in the public mood, thus raising the level of consumer confidence.
However, the differences that arose between some members of the National Assembly and ministers and led to the subsequent resignation of the government has negatively affected the mood of consumers, thus revealing the importance of internal political stability amid highly complex regional conditions.
Research findings have revealed a decline in consumer confidence among the vast majority of respondents. However, the level of that downturn as well as the size of the change in the convictions of consumers varied.
The General Index reported 109 points among citizens, down 4 points. A 10-point fall was also reported among the owners of private businesses.
At the level of governorates, Jahra exhibited a unique increase of 9 points, while all other governorates, including the Capital, fell between 3 and 14 points within a month.
Most ratios for the various categories of the workforce also plummeted between 2 to 17 points within a month.
Economic situation indices down
The ARA Current Economic Situation Index posted 96 points, down 2 points within a month and 6 points within a year.
Similarly, the Future Economic Situation Index recorded 108 points, down 1 point within a month and 5 points year on year.
Most components of the research expressed their dissatisfaction with the current and future economic situations.
Based on the financial and economic developments that took place during November, the general trend in these developments was clearly positive.
Oil, which constitutes the financial and economic backbone of oil-exporting countries, including Kuwait, maintained its price at 62-64 US dollars per barrel despite an increase in the US strategic reserve and production volume. Oil prices have now stabilized in the face of the ongoing US-China trade conflict, which has had a negative impact on prospects for global economic growth.
The volume of Kuwait's oil production reached 2.674 million barrels per day, pending decisions that will be issued soon by the OPEC meeting, which is expected to maintain the policy of an output cut. Moreover, the Stock Exchange achieved market gains in November, its liquidity increased, and confidence in foreign investment in the Stock Exchange strengthened.
The real estate sector and construction industry also recovered by 8%, even though the 2019-2020 budget is expected to show a deficit of approximately 4.2 billion Dinars.
The overall economic situation for Kuwait in November is good; however, the level of confidence shown by respondents in the economic situation has fallen. This is primarily due to the negative impact of several acute differences that emerged between the parliament and the government, leading to the resignation of the latter.
In this atmosphere, the citizens posted 101 points on the Current Economic Situation Index, a loss of 6 points. They also lost 1 point on the Future Economic Situation Index.
At the level of governorates, the Capital reduced its ratio on the Current Economic Situation Index to 100 points, a drop of 15 points, but increased its ratio on the Future Economic Situation Index by 7 points. At the same time, Ahmadi increased its ratios on both indices by 10 and 2 points, respectively.
The diversity of professions and economic sectors in each governorate is reflected differently in the level of satisfaction expressed by residents.
Capital most pessimistic about current personal income
The ARA Current Personal Income Index reported 102 points, reflecting the realistic and relative stability of personal incomes, which maintained their levels as a result of several factors, including:
- The stability of the purchasing power of the Kuwaiti Dinar, despite a slight increase in the volume of monetary inflation, which reached 0.4% per month and 1.7% per annum at the end of September.
- The International Monetary Fund affirmed that Kuwait had been ranked third in the Arab world, with the per capital quota of national income reaching $29,000 per annum.
The stability of the Current Personal Income Index does not reflect the convictions of all demographic groups that make up the research. For instance, the Capital expressed reservations about the current personal income, posting a ratio of 77 points, which represents a fall of 21 points within a month.
Conversely, the Ahmadi Governorate increased its ratio to 130 points, a hike of 22 points within a month.
The youth and citizens also boosted their ratios by 10 and 5 points, respectively.
However, the index fell 11 points among the workforce with a monthly personal income not exceeding 450 Dinars.
Reservations about expected personal income
The ARA Expected Personal Income Index registered 106 points in November, a fall of 6 points compared with October.
The majority of respondents voiced reservations and a lack of optimism about their expected personal income, perhaps due to the instability of world trade and its impact on global economic growth, which threatens the stability of world oil markets and oil prices. Moreover, geo-political tensions in the region remain a source of concern for several countries.
The lower confidence in expected personal income therefore reflects public concerns and fears that the conflict in the region could spread.
Instability in labor market activity
Research findings have revealed several obstacles, gaps, and instability in labor market activity. The ARA Current Employment Opportunities Index scored 130 points, down 9 points within a month and 31 points year on year. This is one of the lowest ratios in 24 months.
Research findings have also revealed the following weaknesses that need to be addressed:
Young people aged 18-35 dropped from 160 points in October to 144 points in November, a loss of 16 points, while rates of youth unemployment constitute a worrying burden in many countries.
For females, the index also showed a decrease of 19 within a month.
The employment ratio among the workers and employees with intermediate educational qualifications decreased by 25 points.
These are several factors that constitute difficulties for various demographic groups in finding employment opportunities. The slow pace of a number of construction projects and a reduction in the pace of work in others have negatively affected contractors, which is reflected in the availability of employment opportunities for different types of workforce.
The labor market is subject to the law of supply and demand. However, a responsible approach is needed to address these gaps and increase the annual share of citizens joining various economic sectors, especially the private sector.
Purchase of Durable Goods Index reports lowest ratio
The ARA Purchase of Durable Goods Index reported its lowest ratio in years, 84 points, a fall of 21 points within a month and 36 points within a year.
This sudden plunge occurred despite several factors that encouraged consumption, including:
The relative stability of oil prices.
A growth of 21.5% in consumer loans since the beginning of the year.
An increase in the loans obtained by citizens and expatriates over the past five years to 4.1 billion Dinars.
Loans directed to the real estate sector were promoted and the facilities for granting personal loans increased. Moreover, the Dinar retained its purchasing power and its exchange rate against foreign currencies. All these factors were designed to increase and stimulate consumption activity, even though the research findings show this has suddenly reduced.
Has the consumption pattern changed? Is this a transient phenomenon? We will follow up consumption activity to establish the facts.