Slight decline in some confidence indices

On account of its interest for monitoring the economic situation in Kuwait, “ARA Research & Consultancy” issues a monthly Consumer Confidence Index, in collaboration with the “Arab Times” newspaper and under the sponsorship of the “Lexus” trademark. The Consumer Confidence Index is considered as the only indicator that measures the consumers’ psychological factors, based on people’s opinions and their prospects about the current economic situation and its future as well as their expectations regarding their financial conditions, and how that reflects on their purchasing power.

The Consumer Confidence Index is issued the first Sunday of each month, and is based on quantitative research on a sample of 500 people, distributed among Kuwaitis and Arab residents in different Governorates.

The study was conducted by telephone through a random call selection, taking into account that the distribution of the sample should be representative of the population in Kuwait.

The general Consumer Confidence Index is based on six indices which the researchers at ARA use to measure the level of the consumer satisfaction and optimism. These are: Current Economic Situation Index Expected Economic Situation Index Current Personal Income Index Expected Personal Income Index Current Employment Opportunities Index

Purchase of Durables Index

The indices’ results in a month basis measure the psychological state of consumers in Kuwait, which equal 100 points. This result (100 points) draws the line between optimism and pessimism among consumers. The more the index surpasses this point, the more the psychological state of consumers in Kuwait is considered to be inclined towards optimism. The more the index declines below this point, the more pessimistic the outlook.

ARA monthly index in collaboration with Arab Times and under sponsorship of Lexus

Slight decline in some consumer confidence indices

ARA Research & Consultancy has released its September 2018 Consumer Confidence Index, in collaboration with the Arab Times newspaper and under the sponsorship of Lexus.

Based on analysis of the research findings and the recorded ratios that reflect the level of consumer satisfaction and confidence, four indices have dropped 1 to 8 points within a month. Meanwhile, two indices gained 3 and 2 points. This relative decline in some indices led the General Index to record 116 points, down 1 point, but up 6 points on a year’s basis.

ARA analysts investigated the reasons as to why consumer confidence dropped 1 point within a month at a time when there have been a number of positive and important financial developments.

For instance, the price of Brent exceeded $80 a barrel, the highest in four years, backed by several factors:

The oil producing countries from within and outside OPEC convened and decided to maintain the current level of production despite pressures to increase it

The US decided to impose sanctions on Iran’s oil and gas sectors in the first week of November, which was an additional factor in raising oil prices

The US strategic reserves and the production levels of some US companies dropped.

The International Energy Agency (IEA) also announced that oil consumption would exceed 100 million bpd by the end of this year.

On the other hand, the upturn in oil prices may face some difficulties as a result of the expected repercussions of international commercial disputes in general and the US-China trade conflict in particular, which may affect the growth of China’s production and hence adversely impact demand for oil.

September 2018 was a positive phase for oil prices, which positively reflected in Kuwait on a number of financial and economic levels. The private sector’s deposits in banks and the credit growth rate increased; the financial market recovered as well as the rating of its companies have improved. Moreover, the role of foreign investment capital within the Kuwaiti Stock Exchange expanded.

Amid these positive factors, the General Index’s lost 1point during September due to the following side reasons:

i. The August index was the highest in recent months.

ii. The Current Employment Opportunities Index dropped 8 points, which is a normal phenomenon that usually occurs during the last months of the year when job opportunities shrink pending the next year’s budgets of many companies.

iii. It is also logical that consumer market activity retreats during September, especially the purchase of durable goods, given the massive spending by families during the summer.

Amid these developments, the citizens recorded 123 points on the General Index, down 1 point, and the Arab residents maintained their 103-point ratio.

On the level of governorates, Jahra posted 134 points, up 7 points, and the Capital registered 133 points, gaining 15 points within a month, which indicates that the Capital and its consumers have greater confidence.

Capital most confident in economic situation

The Current and Future Economic Situation Indices fell 2 points and 1 point, respectively, compared with August, but they gained 6 and 13 points, respectively, on an annual basis. This reflects higher consumer confidence in the current and future economic situations.

The year-on-year rise in confidence in the economic situation is backed by a number of financial and economic developments.

Most prominently, oil prices registered an increase, which had a positive impact on public finances, bank deposits, and the Stock Exchange activity. If oil prices remain at their current level and Kuwait maintains the volume of production and export of oil until the end of the financial year, the budget deficit is expected to be below two billion dinars, boosted by the improved balance of payments.

The operating revenues in most economic sectors in Kuwait increased by 7%, reflecting a good level of improvement in productivity.

Moreover, the Ministry of Commerce licensed 947 new companies in August, as part of the expansion of the private sector and its engagement in numerous economic sectors.

It is noteworthy that some sectors have not yet weathered the difficulties they are facing, despite registering a rise in trading during the second quarter of the year amounting to 857 million Dinars, a growth rate of 3% on a quarterly basis.

The logical discrepancy between the research segments regarding the economic situation is linked to the type and size of the sector they work in. The most obvious manifestation of this was the credit grant, which grew by 4% per annum, in July; the highest share of credit went to the industrial sector, followed by the construction and trade sectors, while the real estate sector’s share of credit loans fell.

Amid this positive economic climate in general, the Capital reported the highest ratio on the Current Economic Situation Index this month

with 137 points, a 15-point rise. It also registered 132 points on the Future Economic Situation Index, up 15 points within a month.

Average wage of citizen working in government sector amounts to 1,782 dinars

ARA Current Personal Income Index registered 109 points, gaining 1 point within a month and 6 points within a year. Also, the Expected Personal Income Index scored 110 points, up 2 points within a month and 6 points within a year.

These ratios reflect the stability of personal incomes on the one hand and show their gradual increase in parallel with the financial and economic developments on the other hand.

This conclusion is confirmed by the wage scale issued by the official departments in late 2017. It shows that the average monthly wage of male Kuwaiti employees in the public sector is 1,782 Dinars and 1,265 Dinars for female employees, a 28.7% difference.

Meanwhile, the average monthly wage of male foreign workers in the public sector reached 714 dinars, and 658 dinars for females.

In the private sector, the average monthly wage of male Kuwaiti workers reached 1,384 dinars, or 22.3% lower than that in the government sector. Similarly, the average wage of female Kuwaiti workers in the private sector amounted to 835 dinars, or 34.3% lower than that of their counterparts in the government sector.

Meanwhile, the average monthly wage of male expatriates working in the private sector hit 263 dinars.

These figures and facts show that the wages of workers in Kuwait are among the highest in the region on the one hand and indicate a gradual improvement in the workforce incomes on the other hand. However, these figures and facts present dilemmas and challenges, mainly including:

1. The need to develop the policy of nationalization in order to increase the percentage of citizens in the total size of workforce

2. Plugging the gaps, even if gradually, between the incomes of citizens working in the government sector and their private sector counterparts, and creating diverse incentives to attract young Kuwaitis to work in various economic sectors

3. Raising the minimum wage of workers who are not educationally and professionally qualified in some companies

Within this atmosphere, Al-Ahmadi governorate posted 133 points on the Current Personal Income Index, the highest in September.

It seems that one of the research segments, namely the earners of 2,250-2,849 dinars, is not satisfied with the Current and Expected Incomes Indices, as they dropped 26 and 13 points on both indices, respectively.

Unemployment rate among citizens 6%

Notably, the research findings revealed a decline in the Current Employment Opportunities Index, which reported 166 points, down 8 points within a month and 9 points within a year.

This fall came at a time of economic and financial growth of banks, industry, trade, and the government’s investments in development, with the exception of the real estate sector. The latter is considered to be the locomotive for many other sectors, given that it still faces some difficulties. This situation reflected negatively on the unemployment rate among citizens, which amounted to 6% or 25,500 individuals.

In this context of the labor market activity, statistics from the Central Administration of Statistics indicate the following:

The number of workers in Kuwait amounted to 2.064 million at the end of the first quarter of 2018, in addition to 683,000 domestic workers, bringing the total number to 2.747 million

The number of domestic workers in Kuwait is the highest in the world, accounting for 24.9% of the total workforce

As for the distribution of Kuwaiti workforce, the number of public sector employees amounted to 2.971 million, representing 80.5% of the national workforce, while the other 19.5% are employed in the private sector.

These figures highlight the need to follow up the policy of improving the performance of national workforce on the one hand and to encourage them to join the private sector and small and medium-sized enterprises. This requires improving the level of educational and voca- tional qualification by coordinating between curricula at all levels and the immediate and future needs of the labor market.

The drop in employment in the last four months of the current year is logical, but most economic sectors are expected to witness further growth, hence the need for more workers. Some studies indicated that about 90% of the companies operating in Kuwait are seeking to up the size of recruitment as of next year.

Amid this atmosphere, some research segments expressed their dissatisfaction with the current employment rate. Some ratios on this index plummeted. On the level of governorates, Hawalli slumped 65 points within a month and Farwaniya 17 points, while the Capital index gained 26 points.

The ratio of employees fell by 22 points, and the earners of a monthly income less than KD 450 dropped 24 points.

It seems that the labor market is going through an intricate transitional

period that requires more stability and growth in various economic sectors in order for the market to regain its expected growth rate.

Consumption index in Hawalli plunges 40 points

ARA Purchase of Durable Goods Index registered 130 points, down 6 points, but boosted its annual ratio by 9 points.

It is logical for the consumer market activity to slacken in September, especially in relation to the purchase of durable goods, given the exceptional spending by families during the summer.

This, despite the limited monetary inflation and the higher credit which amounted to KD 36.3 billion in July, recording a growth rate of 1.2%.

The consumption activity, however, shrank in anticipation of the upcoming seasons.

Notably, the level of consumption plunged 29 to 34 points among the low-income people. It also retreated at the level of governorates, with Hawalli dipping 40 points.