Kuwait’s con­sumer sec­tor eases; em­ploy­ment ro­bust

NBK ECO­NOMIC RE­PORT

Kuwait Times - - BUSINESS -

The con­sumer sec­tor soft­ened no­tice­ably in re­cent months just as sub­sidy re­forms took off, though house­hold in­come growth and em­ploy­ment re­mained ro­bust. Most con­sumer in­di­ca­tors re­vealed fur­ther soft­ness in the third quar­ter of 2016. Con­sumer con­fi­dence weak­ened no­tably at the end of the sum­mer, while card spend­ing shrank y/y. Mean­while, em­ploy­ment among Kuwaitis con­tin­ues to pro­vide sup­port to the sec­tor, thanks to steady gov­ern­ment hir­ing.

Con­sumer spend­ing came un­der pres­sure dur­ing the third quar­ter of 2016. Credit and debit card point-of-sale spend­ing growth slid into neg­a­tive ter­ri­tory for the first time on record, as spend­ing shrank by 0.7 per­cent y/y in 3Q16. Even to­tal spend­ing in­clud­ing ATM with­drawals showed a com­pa­ra­ble de­cline in growth of 0.6 per­cent y/y. Growth in con­sumer spend­ing has been slow­ing since 4Q15, in tan­dem with the sig­nif­i­cant drop in oil prices, though un­til now this slow­down was rel­a­tively grad­ual.

Im­ports of con­sumer goods have also felt the soft­ness in the con­sumer sec­tor. Con­sumer im­ports grew by a mere 1.3 per­cent y/y dur­ing the 12 months through 2Q16; this is well be­low the 8.4 per­cent y/y growth posted last year. Most of the im­pact has been felt in im­ports of mo­tor ve­hi­cles, which recorded an 11 per­cent de­cline y/y in 2Q16. This is a re­flec­tion of a strug­gling auto mar­ket and, more gen­er­ally, weak durable goods pur­chases.

Con­sumer con­fi­dence also weak­ened no­tice­ably in re­cent months. The over­all ARA con­sumer con­fi­dence in­dex stood at 89 in Oc­to­ber 2016, af­ter record­ing its low­est read­ing since 4Q08 at 83 in Septem­ber.

Most of that de­cline is due to weak­ness in the cur­rent in­come and the cur­rent eco­nomic sit­u­a­tion com­po­nents, high­light­ing con­cerns over sus­tained low oil prices and the sub­sidy re­forms be­ing im­ple­mented. House­hold bor­row­ing has also slowed more no­tably in re­cent months. Growth in per­sonal fa­cil­i­ties ex­clud­ing credit for the pur­chase of se­cu­ri­ties slipped to 7.2 per­cent year-on-year (y/y) in Septem­ber 2016 com­pared to 13.7 per­cent a year ago.

The av­er­age monthly net gain in such loans dropped to KD 50 mil­lion in the most re­cent six months, com­pared to an av­er­age of KD 123 mil­lion dur­ing 2015. Em­ploy­ment growth among Kuwaiti na­tion­als has re­mained rel­a­tively sup­port­ive. The num­ber of Kuwaiti civil­ian job en­trants av­er­aged around 4,039 a quar­ter over the four quar­ters end­ing in 2Q16. This rep­re­sents a marked in­crease from around 3,000 job en­trants two years ear­lier.

Of those, gov­ern­ment sec­tor hir­ing has been par­tic­u­larly strong; new gov­ern­ment jobs nearly dou­bled to 2,726 a quar­ter dur­ing the same pe­riod. New pri­vate sec­tor jobs re­treated slightly, but con­tin­ued to hold up rel­a­tively well, ac­count­ing for about a third of new civil­ian jobs. The slow­down in pri­vate sec­tor em­ploy­ment is at­trib­uted to the gov­ern­ment’s con­tin­u­ous ef­forts to clamp down on “phan­tom em­ploy­ment”.

The con­sumer sec­tor is ex­pected to con­tinue to be soft into 2017, as con­sumers deal with fur­ther hikes in util­ity charges next year. While steady em­ploy­ment growth and mod­est gains in salaries in the gov­ern­ment sec­tor will con­tinue to pro­vide sup­port to con­sumers, fis­cal re­forms will be a drag on the sec­tor’s per­for­mance.

Bahrain has no sukuk plans in near fu­ture

Bahrain is not plan­ning a sukuk is­sue “in the near fu­ture”, and any of­fer will de­pend on the shape of the Gulf na­tion’s bud­get for next year which is in the fi­nal stages of ap­proval, the coun­try’s cen­tral bank gov­er­nor said yes­ter­day. Rasheed Al-Maraj, speak­ing to re­porters on the side­lines of an Is­lamic fi­nance con­fer­ence, also re­peated that Bahrain is com­mit­ted to con­tin­u­ing with its cur­rency peg against the US dol­lar.

Is­lamic bank Al-Baraka eyes $300m sukuk is­sue

Al-Baraka Bank­ing Group is tar­get­ing the sale of cap­i­tal-boost­ing sukuk worth $300 mil­lion in the first quar­ter of 2017, the chief ex­ec­u­tive of the Bahrain­based Is­lamic lender, with op­er­a­tions in over a dozen coun­tries, said yes­ter­day. “You’ll see is­suance of sukuk in the first quar­ter of 2017 around $300 mil­lion, and we are talk­ing to some banks” about ar­rang­ing it, Ad­nan Ahmed Yousef told re­porters on the side­lines of an Is­lamic bank­ing con­fer­ence. Yousef added that the is­sue would en­hance the bank’s core Tier 1 cap­i­tal. AlBaraka had a to­tal cap­i­tal ad­e­quacy ra­tio - a key in­di­ca­tor of a bank’s fi­nan­cial health, which com­bines both Tier 1 and sup­ple­men­tary Tier 2 cap­i­tal - of 15.15 per­cent as of June 30, ac­cord­ing to a reg­u­la­tory dis­clo­sure on its web­site.

DUBAI: Vis­i­tors look at planes dur­ing the Mid­dle East and North Africa Busi­ness Avi­a­tion As­so­ci­a­tion (MEBAA) show in Dubai yes­ter­day. —AFP

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