Con­fi­dence, jobs growth pro­pel Kuwait’s con­sumer spend­ing

Wage growth soft­ens, house­hold bor­row­ing eases

Kuwait Times - - Business -

KUWAIT: Con­sumer spend­ing growth re­mains healthy, sup­ported by high lev­els of con­fi­dence, a de­cent pick-up in em­ploy­ment, and an im­prov­ing eco­nomic back­drop helped by higher oil prices. How­ever, some down­side pres­sures re­main: wage growth is soft, house­hold bor­row­ing growth is eas­ing, and the num­ber of ex­pa­tri­ate depen­dents is de­clin­ing. Over­all we still ex­pect the con­sumer sec­tor to re­main sup­port­ive of the broader eco­nomic cli­mate over com­ing quar­ters, but may mod­er­ate some­what from re­cent strong lev­els.

Cen­tral Bank of Kuwait, Na­tional Bank of Kuwait As of 2Q18, con­sumer spend­ing growth had re­cov­ered to near pre-fis­cal con­sol­i­da­tion era lev­els. The value of spend­ing on credit and debit cards at POS ma­chines in­creased by 16.6 per­cent y/y, its strong­est in over four years. To­tal spend­ing, which also in­cludes ATM with­drawals, in­creased by a still no­table 9.5 per­cent y/y, out­pac­ing its per­for­mance from the pre­vi­ous quar­ter. This is in line with the NBK con­sumer spend­ing in­dex, which grew by 8.5 per­cent at the end of Q2.

Un­der­pin­ning the pick-up in spend­ing is op­ti­mism over the cur­rent state of the econ­omy and its fu­ture prospects, fos­tered by ex­pan­sion­ary bud­gets and higher oil prices. Ara’s con­sumer con­fi­dence in­dex stood at 117 points in Au­gust and av­er­aged 111 over the last 12 months, a level not seen since Novem­ber 2014.

An­other con­tribut­ing fac­tor is im­prov­ing em­ploy­ment prospects, with the im­pact of aus­ter­ity mea­sures im­ple­mented over the last two years and the ear­lier slow­down in eco­nomic growth be­gin­ning to fade. Jobs were up 2.9 per­cent y/y in June, with an in­crease in hir­ing of both Kuwaitis and ex­pa­tri­ates.

In fact, Kuwaiti job growth in June was the strong­est in more than two years at 2.5 per­cent y/y. Pub­lic sec­tor hir­ing con­tin­ues to be the main driver (+2.9 per­cent y/y), while growth in pri­vate sec­tor em­ploy­ment still lags be­hind (+0.5 per­cent y/y). It is, how­ever, dis­play­ing some signs of im­prove­ment.

Sim­i­larly, ex­pat em­ploy­ment growth, which has slowed sharply over the past three years, ap­pears to have bot­tomed out thanks to steady hir­ing of both skilled and un­skilled la­bor, ex­pand­ing by 3 per­cent over­all. Ex­pa­tri­ates ac­count for more than 80 per­cent of Kuwait’s la­bor force.

How­ever, some as­pects of the con­sumer sec­tor still ex­hibit soft­ness. For in­stance, growth in house­hold debt has mod­er­ated re­cently, eas­ing to 6.5 per­cent y/y in July, from 7.2 per­cent a year ago on less bor­row­ing for the pur­chase of houses, as well as for the pur­chase of durable goods.

Wage growth has also been weak, with recorded av­er­age ba­sic in­comes for Kuwaitis en­rolled in state pen­sion plans lit­tle changed since 4Q16. Growth in gross av­er­age in­come - which in­cludes ba­sic wage in­come and ben­e­fits - eased to 0.6 per­cent in 1Q18, from a yearly av­er­age of 1.8 per­cent in both 2016 and 2017.

Mean­while, al­though the to­tal ex­pa­tri­ate pop­u­la­tion is ris­ing, the num­ber of ex­pa­tri­ate depen­dents con­tin­ues to de­cline fol­low­ing in­creases in liv­ing ex­penses and still rel­a­tively soft em­ploy­ment growth. The fe­male ex­pa­tri­ate pop­u­la­tion was down 1.9 per­cent y/y as of June, its third con­sec­u­tive de­cline in a year and a half, while the num­ber of ex­pa­tri­ate chil­dren be­low the age of 15 de­creased by 1.1 per­cent. Over­all, the con­sumer sec­tor will con­tinue to see de­cent growth go­ing for­ward but could mod­er­ate slightly from re­cent strong lev­els, af­fected by mod­est wage growth and a slight pick-up in in­fla­tion (from a very low base). An ex­pected steady pick-up in non-oil growth, ris­ing govern­ment spend­ing and es­pe­cially cap­i­tal spend­ing, as well as im­proved pri­vate sec­tor in­vest­ment - re­flected re­cently by in­creased bor­row­ing by busi­nesses - will pro­vide fur­ther sup­port to the con­sumer sec­tor.

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.