Kuwait con­sumer sec­tor sta­bi­liz­ing in 2017

NBK ECO­NOMIC RE­PORT

Kuwait Times - - BUSINESS -

The con­sumer sec­tor is seen sta­bi­liz­ing so far in 2017, fol­low­ing sig­nif­i­cant mod­er­a­tion in the pre­vi­ous year. De­spite ro­bust house­hold in­come and em­ploy­ment growth, most con­sumer in­di­ca­tors soft­ened dur­ing 2016, in­clud­ing con­sumer con­fi­dence, which re­mained no­tice­ably weak in 2017. How­ever, growth in card spend­ing has bounced back though it re­mains far be­low the dou­ble-digit growth of the pre­vi­ous years. Mean­while, em­ploy­ment among Kuwaitis con­tin­ues to pro­vide sup­port to the sec­tor, thanks in large part to steady gov­ern­ment hir­ing.

Con­sumer spend­ing con­tin­ued to mod­er­ate in 1Q17, but main­tained a de­cent pace. Spend­ing growth on credit and debit cards at point-of-sale ma­chines slid back to 6.9 per­cent yearon-year (y/y) dur­ing the first quar­ter, down from 9.1 per­cent y/y back in 4Q2016. To­tal spend­ing in­clud­ing ATM with­drawals growth was im­proved slightly at 4.3 per­cent y/y.

Mod­er­a­tion in the sec­tor was also felt in weaker im­port growth. Con­sumer im­ports were flat in 1Q17, grow­ing by just 0.2 per­cent y/y. Im­ports of mo­tor ve­hi­cles has been par­tic­u­larly weak, though a 3 per­cent y/y de­cline in 1Q17 was an im­prove­ment on the deeper de­creases seen in re­cent quar­ters and pointed to some sta­bi­liza­tion. The auto mar­ket has been strug­gling and sales are es­ti­mated to have re­treated by 2025 per­cent in 2016. More gen­er­ally, there has been no­tice­able weak­ness in con­sumer durable goods pur­chases as re­flected in the Ara con­sumer con­fi­dence in­dex.

In­deed, while con­sumer con­fi­dence has im­proved in re­cent months, it re­mains some­what soft. Though con­fi­dence weak­ened in May to 99, it has been im­prov­ing since 3Q16. The in­dex has been on a down­ward trend for four years and fell more rapidly in 2016 af­ter the gov­ern­ment hiked fuel prices. It has since re­cov­ered some­what, though the gen­eral in­dex’s 3-month av­er­age in May was still down 2.5 per­cent y/y. The durable goods com­po­nent has re­mained par­tic­u­larly dis­ap­point­ing, with the 3month av­er­age down 9 per­cent y/y.

House­hold lend­ing growth has firmed up slightly since the be­gin­ning of the year. Growth in per­sonal fa­cil­i­ties ex­clud­ing credit for the pur­chase of se­cu­ri­ties slipped to 6.9 per­cent y/y April 2017, com­pared to 11.6 per­cent growth a year ago. The av­er­age monthly gain in such loans rose to KD 70 mil­lion so far in 2017, com­pared to a KD 59 mil­lion av­er­age in 2016.

Pub­lic sec­tor hir­ing in 2016 con­tin­ues to sup­port na­tional em­ploy­ment growth. The num­ber of Kuwaiti civil­ian job-en­trants av­er­aged nearly 3,900 a quar­ter dur­ing 2016, sup­ported by strong hir­ing dur­ing 1Q16. This rep­re­sents a marked rise from around 3,000 job en­trants two years ear­lier. Around 70 per­cent of th­ese new jobs were in the gov­ern­ment. While of­fered new pub­lic jobs have re­treated slightly, they con­tinue to be an im­por­tant driver of job gains in the post-$100 oil era.

The con­sumer sec­tor is likely to sta­bi­lize fur­ther in 2017. The re­cent de­ci­sion to im­ple­ment more mod­er­ate hikes in util­ity prices, com­bined with a gov­ern­ment com­mit­ment to limit its spend­ing cuts, should con­tinue to pro­vide de­cent sup­port to the con­sumer sec­tor.

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