UAE Consumer Confidence at a decline in Q4
The UAE’s Consumer Confidence index has shown a significant decline of 10 points bringing the index from 102 points in Q3 to 92 in Q4, according to the latest Nielsen quarterly Global Consumer Confidence Survey Index released today. The Nielsen survey, which tracks consumer confidence, major concerns and spending habits, was conducted among more than 17,500 Internet users in 29 markets between December 4 -18, 2009.
“The drop in the consumer confidence can be explained by looking at the way consumers have behaved in the past. For a long period the consumers in UAE remained optimistic that the world around them will not be affected,’ said Himanshu Vashishtha – Director Consumer Research – Middle East, North Africa and Pakistan, The Nielsen Company. “This remained the case till end 2008 until they witnessed the steep correction in real estate prices which led to a drop in consumer confidence of 21 index points in first quarter of 2009. However, as the economy stabilized and government support became evident, we saw some recovery in consumer confidence index among UAE consumers which rose by 13 index points in the third quarter of 2009 (October) with the consumers hoping that the worst is over. “With the volatility around them in the last 12 months, consumers have had a roller coaster ride with respect to the perceptions about their own financial stability and have become sensitive to news of events especially if unfavorable and ambiguous” he added.
The announcement on loan payment delay made by Dubai World in early December of 2009 directly resulted in the shaking of the consumers’ confidence who had just started to see a ray hope in the last quarter of an economic recovery. “When the Dubai world announced that it is seeking a delay in repayment of the loan, it caught everyone by surprise and sent shockwaves all across the world. Given the initial uncertainty around the Dubai World crisis it is likely to have spooked the consumers in UAE. This was too close home to ignore and raised concerns about another imminent crisis in UAE. Thus the consumer confidence was shaken resulting in a 10 point decline in consumer confidence, especially since the survey was done first half of December before the situation stabilized” said Vashishtha. “The crisis seemed to have gotten over just as suddenly as it began with Abu Dhabi agreeing to a new bond issue for Dubai. This in addition to likely rescheduling of some loans and new bankruptcy laws is bound to show some improvement in the consumer confidence index in the UAE in the next wave. Consumers in UAE will recover their confidence but maybe at a slower pace” he added.
Globally, between June and December last year, the Nielsen Global Consumer Confidence Index rose five points from 82 to 87.
Indonesia ranked 1st and India ranked 2nd, while South Korea and Japan, were the least confident countries globally. 8 out of 10 countries in the top 10 were Asian Countries. Brazil (ranked 3rd) and Canada (ranked 10th) were the only countries outside of Asia to make the top 10. Hong Kong recorded the highest consumer confidence increase for the second consecutive quarter in Q4 – up seven index points from 93 in Q3 2009 to 100 in Q4. Confidence in Hong Kong raised a total of 21 points since June 2009.
Seventy one percent of UAE consumers surveyed believe they are still in recession and they continue to change their spending habits accordingly. About 77 percent of the nation’s consumers have changed their spending habits to save on household expenses, even though more than half of the UAE consumers surveyed said that their state of personal finance is excellent or good for the next 12 months
The economy and job security remain top global concerns, however the concern for job security continued to decline in Q4 2009. In June 2009, one in four (20 percent) of consumers cited job security as a main life concern but this decreased to 13 percent in the last month of 2009. In the UAE, 19 percent of consumers rate job security as a top concern (compared to 24 percent in October).
“Consumers in the UAE are still concerned about job security and budgeting their spending accordingly. They show more discretion, especially on buying new clothes; on out of home entertainment and upgrading technology like mobiles, PC Laptops etc.” said Vashishtha
On the upside of things, the survey shows that consumers in the UAE are still hopeful that the recession will be over soon. 36 percent are confident that the recession will be over by end of 2010.