Cash gains boost Kuwait’s consumer spending
Kuwait, April 14, 2012
A large Amiri cash grant early in 2011 followed by a series of pay hikes for nationals triggered a strong pick up in Kuwait’s consumer spending and consumer confidence in the first three quarters of the year, said a report.
Household debt also ended a year of slow growth in 2010 to begin a solid recovery in the second quarter of 2011, which has been sustained since, said NBK’s latest GCC Brief.
Employment growth among Kuwaitis remained solid. Expatriate hiring in the private sector returned to positive growth for the first time since the financial crisis, the report said.
The Amiri grant of KD1,000 ($3,607) to every Kuwaiti national paid in February 2011 provided around KD1.1 billion in additional spending power to households, or more than 3 per cent of 2010 GDP. Also, in an effort to counter rising food prices, the government hiked food subsidies, further boosting spending power.
Point-of-sale (POS) transactions on both credit and debit cards in the third quarter of 2011 were 29 per cent higher than a year before.
According to the report, pay raises for Kuwaitis and some expatriates working in the public sector also helped drive up spending in 2011. The government approved a number of pay hikes for public sector employees including teachers, oil sector employees, and engineers.
Military personnel also received pay increases in 2011. Increases are mostly a response to a higher cost of living in the last two years which had put pressure on real wages.
Approved public sector pay hikes in 2011 should lift aggregate household income by an estimated KD700 million annually and thus provide a strong boost to household spending power. Similar pay hikes have been approved this year by the government for Kuwaitis employed in the public and private sector.
As a result of the pay hikes, growth in total wages of Kuwaiti civilian employees is estimated to have accelerated in 2011 to its most rapid since 2009. Year-on-year growth in aggregate income is estimated at 7.1 per cent at the end of 2011 compared to 5.6 per cent in 2010. This rise in aggregate wage income captures growth in both salaries and employment.
Consumer confidence has improved as a result, with published indices showing strong gains during the first half of 2011, said the report.
The Ara’a consumer confidence index rose to 133 early in 2011 after reaching a low of 99 in November 2010. Bayt.com’s index climbed to 593 from 529 in 2010. Indices have since eased following the initial jump early in 2011 but remain generally above levels registered in 2010.
Household debt also picked up during the first half of 2011 and remained strong through the fourth quarter of 2011.
This came on the heels of weak growth in 2010 and in the first quarter of 2011. Growth in total outstanding consumer and installment loans at banks accelerated to 8.4 per cent by the end of 2011, according to the report. – TradeArabia News Service