JEDDAH: Consumer confidence surged in Saudi Arabia and other Middle East and North African states in the first quarter, but deteriorated in the euro zone periphery as Portugal's financial woes came to a head, a survey released Sunday showed.
Saudi Arabia, second behind India in the quarterly global survey, and the UAE also saw double-digit growth in their scores from the previous quarter's survey, Reuters reported.
Saudi Arabia's score jumped 11 points from the fourth-quarter of 2010 to 118 in the global poll of consumer confidence by The Nielsen Company, a market information and analysis concern.
Confidence remained the highest in India, maintaining its fourth-quarter score of 131. India's score was below the country's record 137 index reading in the second half of 2006, the highest reading for any country in the Nielsen consumer confidence index's history.
John Sfakianakis, chief economist at Banque Saudi Fransi, said consumer confidence went up in Saudi Arabia due to optimism stemming from the government's raft of social assistance programs dominated by the announcement it would invest in the construction 500,000 housing units. The programs also include financial injection into the Real Estate Development Fund and, for public employees, a two-month salary bonus, a 15 percent raise to cover rising living costs, a minimum wage and unemployment checks starting later this year. The public sector is the Kingdom's largest employer of Saudis. Some companies followed suit and distributed bonuses to their employees, especially Saudi ones.
“Naturally, as public and private sector employees benefited from one-off bonuses in March coupled with government handouts, the overall confidence rate rose,” said Sfakianakis.
He said it would be interesting to see how confidence levels fare in the next few quarters as some of the short-term government support programs wane off and others, like home construction, begin to take effect. Interestingly, Egypt's consumer confidence rose more as a reflection of anticipated optimism and regime change and political reform. Certainly it remains to be seen if consumers will begin to interpret rising inflationary pressures now running at 12 percent.
In the case of the UAE, the recovering local economic conditions are adding to the positive consumer climate felt which is set to continue, Sfakianakis said.
Jarmo T. Kotilaine, chief economist at the National Commercial Bank, said the survey results highlight the reality of a dual-track global economic recovery that is likely to remain with us for some time as the West only very gradually emerges from a major structural crisis while the emerging markets benefit from sound macroeconomic fundamentals.
The data on Saudi Arabia is generally consistent with other survey evidence, as well as real economic indicators such as the TASI (Tadawul All-Share Index) and trading volumes. Even bank lending is gradually recovering, although the increases have been very modest in real terms. "All of this suggests that the government, through its proactive policy response, has successfully ensured economic continuity through a period of unusual regional turmoil and global economic risks," Kotilaine said.
By international standards, he said, "the effectiveness of Saudi policy in ensuring continuity and stability is enviable. This is one of the few countries in the world for which the growth outlook has significantly improved in recent weeks, while consumers have benefited from extra bonuses and a more inclusive growth paradigm."
But even as the outlook is becoming clearly more positive, the great challenge remains in translating this growing optimism into sustained increases in private sector consumption and investment. For this to happen, Kotilaine said bank lending will have to revive more decisively and the normalization in capital markets should gather further momentum.
Problematically, the global risk profile remains exceptional: The unsustainability of US economic policy, the euro zone sovereign debt crisis, and inflationary pressures and policy tightening in key emerging markets, all factors that have caused considerable market volatility and recurrent investor risk aversion in the past. Under the circumstance, he said, it is still possible that growth in Saudi Arabia will continue to rely disproportionately on government spending and the oil sector for some time. But even this more cautious scenario is one of considerable economic resilience by global standards.
China's score jumped 8 points from the previous quarter to 108, reflecting inflation-beating income growth, particularly in rural areas, The Nielsen Company said.
The top 10 index readings were: India (131), Saudi Arabia (118), Indonesia (116), Australia (110), the Philippines (110), Switzerland (110), Singapore (109), the UAE (109), China (108) and Hong Kong (107).
A score below 100 signals pessimism about the outlook.
The survey was taken between March 23 and April 12, covering 28,000 consumers in 51 countries, Reuters said. The survey is based on consumers' confidence in the job market, status of their personal finances and readiness to spend.
Portugal, which was finally forced to follow Greece and Ireland and seek an international bailout last month, ranked bottom in a quarterly global survey of consumer confidence by The Nielsen Company.
Consumer morale globally improved slightly from the fourth quarter of 2010, helped by sharply rising confidence in fast-growing Asian economies and in Europe's biggest economy Germany. US consumer sentiment also increased slightly.
Asia dominated the top 10 most optimistic markets while nine of the 10 most pessimistic markets were in Europe. Sixty-three percent of consumers in the Asia Pacific said their job prospects over the next year were good to excellent, an 11 percentage point jump from the previous quarter and indicating Asians will step up spending in coming months.
Confidence levels in Asia, the Middle East and Africa and Germany reached the highest since the survey was launched in 2005.
Egypt's confidence score surged 29 points to 102, the biggest increase among 51 markets surveyed, following the social uprising which toppled President Hosni Mubarak.
"The joy of gaining civil and political freedom and experiencing the first truly free voting has raised consumers' expectations and hopes for faster economic growth," Reuters quoted Khaled El Tohami, managing director, Nielsen Egypt, as saying.
Source : Arab News, May 22, 2011 23:40