ARA consumer confidence marks 105 points in the month of July continuing to decline and narrowing down the margin of optimism. 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 result of each of the indices is drawn from the answers given by the individuals of the sample, answers identified in the questionnaire as positive, negative, or neutral. The index consists of 100 points, and the 50th point represents the middle point between optimism and pessimism among consumers. The higher the index rises over the point 50 towards 100 point, the higher the consumer optimism in Kuwait is. On the other hand, the lower the index drops from the point 50 towards the point 0, the more pessimistic the consumer's outlook.

Introduction
The month of July witnessed a number of events that positively impacted the country, including the value increase of the Kuwaiti Dinar against the US Dollar - in a second increase this year of the Dinar exchange rate; this took place after the Central Bank of KuwaitCentral Bank of Kuwait relinquished linking the Dinar with the Dollar and instead tied it up with a currency basket. Additionally the rise of the price of Kuwaiti barrel of crude oil, to its highest level ever, reaching 69.13 USD. On the other hand, the international "Credit Suisse" Bank issued a report analyzing both the economic and financial situations of Kuwait. The report stated that "the Kuwaiti economy is enjoying yet another year of strong economic growth". This rapid growth is backed up by the increase of investments as well as the high government spending on development projects. The bank report expected a growth in the Kuwaiti economy of 5.8% in 2007 and 5.6% in 2008.

In parallel, the negative impact was felt in the adoption of the general state's budget for the fiscal year 2007/2008, which predicted that the deficit would exceed 3.8 billion KD, due to an increase of 5.2% in expenses on one hand, and a decrease in the petroleum revenues if the barrel is for 36 USD (a price that does not meet market trend nor the expectations for the near future), on the other hand.

ARA Consumer Confidence
The General Consumer Confidence Index marked 105 points in July, thus continuing to decline and decreased by 2 points. While the purchase of durables index remained ahead of the other six indices (141 points) marking a confidence increase of 7 points; and while the current personal income index increased by 5 points slightly alleviating the negative inclination in the general index; all other indices showed a decrease in the consumer's confidence. The Arab residents' confidence towards the general index increased by 2 points, marking 110 points, however, the level of Kuwaiti nationals' confidence decreased by 4 points to settle at 102. Females expressed a pessimistic view (95 points), as their confidence in the general index decreased by 8 points. In contrast, males' confidence rose by 2 points compared to June, to reach 111.

The employees' group showed an increase in confidence by 2 points thus reaching 110, while the confidence of the private business owners (106 points) decreased by 1 point. The unemployed group came next (96 points) marking a 9 point decline and widely displaying a pessimistic mood compared to last month. On the level of Governorates, the general confidence index marked a decline of 25 points in Al-Jahra which used to rank first, and settled at 95 points in July, thus abandoning its optimistic view of last month. On the other hand, Al-Farawaniya demonstrated a confidence increase of 9 points, to equal Al-Ahmadi Governorate, both leveling at 109. It seems that the different age groups showed a positive outlook towards the general index. The older group (over 55 years old) marked an increase of 2 points reaching 119, the younger group marked 108 points thus rising by 3 compared to June. Despite the decrease of the middle aged group (35-55 years old) confidence by 7 points compared to last month, the latter remained in the safety zone marking 100 points.

Below is a detailed description of the 6 different indices which constitute the ARA Consumer Confidence Index.

Current Economic Situation Index
The Current Economic Situation Index declined drastically in July, marking 95 points, thus decreasing by 9 points compared to June. Consequently, the index showed a loss in the optimistic view that prevailed during the last two months and entered the pessimistic zone. As a result, all hope that the consumer's optimism towards the current economic situation would last, disappeared, despite the positive economic indices which attest to the strength of the Kuwaiti economy. This could be normal during summer where economic activity in the country slows down.

The private business owners' group maintained a pessimistic view, as the relative index dropped by 7 points compared to last month, thus reaching 73 points. In fact, this group, on account of the nature of its work, does not foresee any improvement in the current economic situation. The confidence of the employees' group also decreased by 6 points compared to June to reach 98 points.

The index decline was also obvious for the different family income groups; however, the drastic decline was mostly noticeable for the average family income group.

On one hand, the index decreased by a full 20 points for the group of monthly family income ranging between 700 and 1,000 KD, yet this group maintained an optimistic view (106 points), contrary to the other groups. On the other hand, the index decreased by about 11 points for the group with an income ranging between 400 and 700 KD, thus marking the lowest rank among indices, with 92 points in the pessimistic zone.

The groups with different educational levels also marked a decline in confidence, except for the group of Diploma holders who marked an increase of 8 points to arrive at 107. This confidence increase, however, does not remove the pessimistic view of the other groups; where the group with a high school degree marked 85 points declining by 9 compared to the month of June. Similarly, the index decreased by a whole 18 points for the group with intermediary education or below, marking 94 points. It seems that this particular group lost hope, to some extent, in the possible improvement of the current economic situation although the group had expressed last month a relatively positive outlook towards this index.

Both the females and males' groups demonstrated a pessimistic outlook toward the index marking equal points of 96 each, as their confidence index decreased by 13 and 6 points respectively.

The pessimistic outlook in the current economic situation is further confirmed in the 11 point decline of the Kuwaitis' confidence (95 points) as well as in the 4 point decline among the Arab residents (96 points) in comparison with the month of June.

On the level of Governorates, Al-Jahra lost its first rank position as its index dropped by 39 points thereby quitting the safety zone to record 93 points. Both Hawalli and Al-Farwaniya marked 91 points each declining by 14 and 5 points respectively. On the other hand, the Capital Governorate maintained its confidence level marking 104 points compared to June.

Expected Economic Situation Index
The Expected Economic Situation Index continued to decline, in line with the previous months, until it reached 98 points in July, thus decreasing by 2 points compared to June. The index abandoned its optimistic outlook towards the expected economic situation. This negative view affecting consumers is probably due to the fact that the decisions and promises to improve the productive sectors and to support and develop the private sector were not met. As for the family income groups, the high income group (more than 1,500KD) marked a 3 point decrease in confidence to reach 92 points and maintained therefore its dim outlook towards the index. Confidence declined by 12 points for the group with incomes between 401-700 KD to reach 97 points. On the contrary, the low income group (less than 400KD) increased confidence by 6 points to reach 104. This increase therefore demonstrated a level of hope that the expected economic index will improve and this group's wages will increase in the future.

In parallel, the group of private business owners marked 98 points thus demonstrating a 21 point increase in confidence yet failing however to reach the safety zone. The employees' group increased confidence by 4 points to reach 103 and the unemployed group dropped by 14 to reach 91 points abandoning thus the optimistic outlook it showed in June. The optimistic and pessimistic outlooks in confidence differed among age groups. The older group (over 55 years old) marked 102 points, followed by the middle age group (35-55 years old) with 92 points, where each dropped by 11 points. The young group (18-35 years old) increased confidence by 8 points to settle in the safety zone with 104 points. The expected economic situation index improved confidence with Arabs residing in Kuwait by increasing 3 points to reach 112 points. As for Kuwaiti nationals, the confidence decreased by 5 points to remain in the pessimistic zone with 90 points.

Current Personal Income Index
The Current Personal Income Index increased to 105 points contrary to the trend during the last months, by improving 5 points compared to June, and it recovered its position in the safety zone.

Despite the 9 point drop in confidence for private business owners, this group still maintains its first rank with a solid 122 points, demonstrating a positive outlook. The employees group comes next (114 points) with an 11 point increase, followed by the unemployed group who dropped by 9 points to reach 85 points thus retaining the pessimistic outlook. This sounds reasonable for an unproductive group. It is worth to mention that confidence increased for the low income group (less than 400 KD) by 35 points to reach 136 points, and rank first. However, the high income group (more than 1,500KD) remained pessimistic (96 points) despite a 10 point increase compared to June.

The confidence index fluctuated among different educational level groups. The intermediary or below education group increased by 5 points to reach 121, the Diploma holders group increased by 28 points to reach 118, leaving thereby the pessimistic zone it resided in thru June, and the secondary educational level dropped by 11 points to settle at 82 points in the pessimistic zone.

Arabs residing in Kuwait demonstrated a 15 point increase in confidence to reach 114, exceeding therefore the Kuwaiti nationals who dropped by 1 point to reach 101 points. On the other hand, females maintained their 89 points in the pessimistic zone, contrary to males who increased by 8 points compared to June to reach 116 points.

Expected Personal Income Index
The Expected Personal Income Index marked a slight 1 point decrease in confidence, maintaining thereby a positive outlook, by reaching 101 points on the borders of the safety zone.

It is worth to note that the high income group (more than 1,500KD) continued to decline over the past months, where it dropped by one point this month, and stayed in the pessimistic zone (92 points), ranking last compared to other income groups. As for the low income group (less than 400KD), it marked an increase of 12 points compared to June, to reach 109 points and rank first among income groups.

The private business owners group's confidence dropped by 16 points to reach 91 points, followed by the unemployed group which dropped by 2 points compared to June to arrive at 97 points.

The older group (above 55 years old) demonstrated an increase of 11 points to reach 121 points.

However, the middle age group (35-55 years old) dropped by 6 points compared to June to settle at 95 points.

As for nationality groups, Arabs residing in Kuwait showed an optimism towards the index by improving 3 points to reach 109 points; whereas, Kuwaiti nationals' confidence dropped by 4 points to reach 96 points.

Current Employment Opportunities Index
Despite the 5 point drop in the Current Employment Opportunities Index compared to June, the index maintained a high level of optimism (127 points). It seems that Mubarak Al-Kabeer Governorate is still pessimistic towards the current employment opportunities index, for it maintained its 94 points ranking last among all governorates. The index also dropped by 4 points in Hawalli and 35 points in Al-Jahra to make these two equal with 143 points each. The Capital Governorate increased by 27 points to attain 134 points.

As for the optimistic outlook that dominated the different educational level groups, the intermediary or below level maintained its first rank despite the drastic 56 point drop in confidence to reach 167 points.

As for the secondary level group, confidence increased by 23 points to reach the safety zone with 112 points. Moreover, the university level group maintained its positive outlook despite losing 7 points compared to last month. The unemployed group marked a 15 point decrease this month to reach 104 points, followed by the employees group which dropped by one point to settle at 140 points in the positive zone, while the private business owners group increased by one point to reach 120 points. As for gender groups, the confidence switched throughout this month. Females dropped by 26 points to reach 116 points, while males improved by 7 points surpassing the females to achieve 132 points.

Purchase of Durables Index
The Purchase of Durables Index continued to increase, improving this month by 7 points to reach 141 points. The increase of confidence in the purchase of durables index is attributed to the importance of these products in this season and the constant demand for them as well as their accessibility through premium discounts and installments offered in the market. Kuwaiti nationals kept their high confidence in this index in July by improving 15 points compared to June (148 points), while Arabs residing in Kuwait dropped by 9 points to reach 120 points.

As for income level groups, the low income group (less than 400KD) marked a 20 point drop in confidence compared to June to reach 99 points, enter the pessimistic zone, and rank last among income groups. On the other hand, confidence increased by 7 points for high income groups (more than 1,500KD) to reach the safety zone with 101 points. Confidence varied among governorates where Al-Ahmadi maintained rank one (242 points) despite its 40 point drop compared to June. Moreover, Al-Farwaniya demonstrated a remarkable 50 point rise this month to reach 149 points. However, the Capital Governorate retained its 108 points from last month. Despite the 15 point confidence increase for females thus giving a positive outlook towards the index (113 points), males' confidence remained higher with a one point increase over June to reach 157 points.

© Arab Times 2007

 

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