Despite the effects of the global credit crunch being widely felt around the GCC with large drops in consumer confidence, KSA has reported only a minor dip, with consumer confidence moving down the index by just0.9 index points. Moreover, job seekers remain optimistic for the future with37% of respondents believing business conditions- and33% believing the country’s economy- will improve in the next year; according to recent research conducted by the Middle East’s number one job site - Bayt.com in conjunction with research specialists YouGov.
The trend of falling consumer confidence was repeated across the Gulf and Levant countries. Kuwait’s consumer confidence was the hardest hit; falling by16.7 points, closely followed by UAE which dropped15.0 points, with dips in Bahrain of12.0 points and Qatar of8.9 points. Confidence in Syria and Lebanon dropped by9.7 and8.0 points respectively. Lebanon’s large decline in February’s consumer confidence levels is starkly contrasted against a phenomenal improvement in the index of25.5 points in the last wave, conducted in November of last year.
Interestingly, North Africa did not appear to be as hard hit as the rest of the Middle East: Egypt’s consumer confidence dropped by4.4 points, while Algeria was the only country that reported an increase – moving up the index by1.5 points.
The Consumer Confidence Index (CCI) is a measure of consumer expectations and satisfaction of various elements of the economy including inflation, job opportunities and the cost of living.
“What we are seeing with the results of the CCI is that while the effects of the global economic downturn can’t be taken in isolation, they are having a significant impact on this region, and more specifically are affecting some Middle Eastern countries much worse than others. This sort of research is really important as an indicator of the prevailing feelings towards the current business and economic environment, because it comes from a grass roots level - from the people that are most affected,” explained Bayt.com’s Regional Manager, Amer Zureikat. “Conducting surveys such as the Bayt.com and YouGov Consumer Confidence Index on a periodical basis, to measure how attitudes and opinions have changed overtime, allows businesses, HR professionals and other stakeholders to benefit from up-to-date insights into how consumers are thinking; the details of which can then be significant drivers for adapting business strategies and making them relevant to the current environment.”
Part of the CCI is an assessment of respondents’ personal financial situation, and whether they feel that they are better, or worse off than the last12 months. Almost a third of all respondents in KSA (28%) felt that they were better off than last year, indicating that the gloomy financial environment isn’t negatively affecting everyone in the Kingdom. Overall, on a regional level, a quarter of respondents felt they were better off;34% felt they were worse off, and35% felt their financial position hadn’t changed.
Personal finances improved most significantly in Algeria, Qatar and KSA, with31%,29% and28% saying their financial position had picked up. Syria’s respondents were the most affected in terms of personal finances, with almost half,48%, stating that the situation with their personal finances had deteriorated.
Consumer expectations and the level of optimism towards the future is another indicator for measuring consumer confidence. This took a significant blow in all countries, with the exception of Algeria which marked an improvement. The UAE moved down the index by12.3 points, while Kuwait was hardest hit, dropping by14.7 index points. Qatar and Bahrain were next in line with the worst decreases; dropping9.5 and8.6 points respectively. KSA was the least affected in the Gulf, dropping by just3.2 points. Aside from Algeria, the least affected in terms of consumer expectation was Syria, marking a decrease of1.9 points; suggesting respondents are remaining optimistic despite dropping consumer confidence levels.
There is some light however at the end of the tunnel according to the survey’s respondents, with28% believing that their country’s economy would be better in a year’s time, while20% believe it will stay the same. In KSA, a third of all respondents believed things would get better within their country’s economy.
The respondents were also optimistic when asked whether or not they felt their personal financial position and that of their family would be better in a year’s time.38% believed things would improve, while just12% felt their finances would worsen. Most optimistic in terms of an imminent improvement were Tunisia’s respondents, with55% agreeing things would get better. In the Gulf, Saudi Arabia’s respondents were found to be the most optimistic, with46% anticipating an improvement. In the UAE, respondents were roughly divided on the future outcome, with26% saying things would be better,23% stating things would be worse and22% believing the status quo would prevail.
In terms of propensity to consume, Syria was hardest hit, dropping18.2 points on the index, followed by the UAE which dropped by12.2 points. The picture around the rest of the Levant and the Gulf was not quite as bleak. In the Gulf; Kuwait and Qatar both recorded drops of7.8 and0.1 points and in North Africa; Morocco and Egypt both decreased by2.5 and0.7 points respectively. Surprisingly, almost half of the countries reported improvements in their propensity to consume – KSA and Lebanon both moved up6.0 points each, Bahrain improved by4.5 points and Algeria improved by2.4 points.
When asked about consumer spending, just19% of respondents believe that now is a good time to buy durable goods, with46% deeming it a bad period. Lebanon, Tunisia and Algeria were the most positive about the current environment for spending money, with24% of Lebanon’s respondents and23% each of Tunisia and Algeria’s respondents citing it a good time to buy.
“The consumer confidence index provides an interesting and relevant set of insights into how consumers are feeling during a certain period and although it is just an indicator, it reveals a very clear picture of the countries where people feel it is still a good time to buy. This not only equips marketers and other companies with a strong insight for selling their products, but it sends a clear message to all involved in commerce that consumers are less inclined to buy at present; therefore brands offering strong value propositions will most likely succeed in these trying times,” said Nassim Ghrayeb, CEO, YouGov.
How people feel about the local job market and their attitudes towards availability of jobs and salary satisfaction is measured in the employee confidence index – a significant contributor to the CCI. Employee confidence took the biggest dip in Bahrain, moving down the index by a massive20.0 points. This was closely followed by Kuwait and the UAE, which dropped19.5 and18.0 points each.
“As usual, the CCI data revealed that respondents feel that salary increases haven’t kept pace with the cost of living, with an overwhelming64% saying that increases are not in line. KSA was slightly below the average in terms of people feeling the inadequacy of their salary raise, with63% saying it hasn’t kept pace, while a fifth said it had kept pace similarly to the rising costs of living. Interestingly,29% of respondents in Qatar said their salary had increased similarly to the rising cost of living, while at the other end of the spectrum; just over half of respondents in Qatar,56%, believed salaries had not kept pace. It suggests that Qatar is not quite as badly affected as other markets at this time,” explained Zureikat.
Optimism has waned in terms of job availability in a year’s time the survey showed; with41% of respondents believing work availability would be worse. A roughly equal split occurred in terms of people believing job availability would remain the same (23%), and availability would improve (21%). Most optimistic about the future availability of jobs at30% was Tunisia, while conversely in North Africa, Egypt’s respondents were mostly pessimistic with just16% stating the situation would be better. In the Gulf, Kuwait and the UAE shared the same pessimism about jobs being available in the future, with49% agreeing the situation would be worse. The figures suggest that the majority of residents are feeling the effects of the ongoing credit crunch, but a proportion believe that things will soon look up. In KSA,26% believe job availability will be better by next year.
“The Middle East has been feeling the effects of the global financial crisis for a few months now, but it is only through surveys like the Bayt.comand YouGov Consumer Confidence Index that feelings of consumers about their financial position and that of their countries are truly revealed. In conducting this periodical survey, it exposes very interesting trends that may be expected during certain economic cycles, and it empowers HR stakeholders, professionals and other organisations with the knowledge that can help them do their part for continually improving the economic situation: financial crisis or otherwise,” concluded Zureikat.
Data for the February/March2009 Consumer Confidence Index Survey was collected online between the period of2nd February and2nd March2009 with8,686 respondents from across the UAE, KSA, Qatar, Oman, Kuwait, Bahrain, Syria, Jordan, Lebanon, Egypt, Morocco, Tunisia, Algeria and Pakistan. Males and females aged over18 years old, of all nationalities, were included in the survey.