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Job Uncertainty Hits Consumer Confidence: MasterCard

Dr. Yuwa Hedrick-Wong, economic advisor, Asia/Pacific, MasterCard Worldwide, said UAE’s current consumer confidence score of 75.4 represented a drop from a period ago when it was 85.4 in 2008 and 78.5 a year ago. It is also below the market historical average of 83.5. “However, consumers remain highly optimistic especially about regular income (91.6), the economy (83.2) and quality of life (76.7).”

The index is calculated based upon percentage response figures, with zero as the most pessimistic, 100 as most optimistic and 50 as neutral. Five economic factors are measured: employment, the economy, regular income, stock market and quality of life.

According to Dr Wong, UAE consumers were somewhat more optimistic about the stock market (68.3) than they were a period ago (65.2) and year ago (73.4). However, consumer outlook on employment at 57.0, though still positive, has seen a significant drop, from 95.8 a period ago and 85.6 a year ago; representing the lowest index score for measurement for employment in the UAE since the beginning of the Index in the first half of 2004.

“In spite of the severe global credit crisis, the GCC markets are in a strong position to weather the economic storm,” he said at media briefing in Dubai. “In the short term, GCC governments have the financial wherewithal to provide the necessary fiscal stimulus to support continuing economic growth to mitigate the worst of the global impact; but more importantly, the investment made in recent years in infrastructure and capacity building will bear fruit in the coming years and decades. The question of whether GCC markets may suffer from a technical recession in 2009 is not the critical issue; the fact today is that their economies are grounded on a much more robust and sustainable foundation than ever before.” In line with the latest Index, MasterCard has also launched the inaugural MasterCard Worldwide Index of Consumer Purchasing Priorities based on consumer surveys across seven markets in the Middle East and Africa.

According to the survey, consumer confidence in the Middle East as a whole, remains unscathed and continues to be fairly optimistic. The Index in the Middle East, which currently stands at 72.7 shows that consumers have in fact become a little more optimistic than period ago (66.4) and slightly less so with the optimism of year ago (73.6) and the Middle East historical average (76).

Other highlights include: Currently a majority of consumers in the Middle East are spending between 41 and 60 per cent of their total annual household income on household expenses. This is less so for consumers in the UAE (21 to 30 per cent). A majority of consumers in the Middle East do not believe their expectations on the increase in inflation will affect their spending. UAE consumers however expect to cut back on their spending. Across the Middle East, a majority of consumers are expecting to spend on their children’s education and dining and entertainment in the next 12 months ahead. In the UAE, however, consumers saw property and renovations, fashion and accessories and dining and entertainment as main areas they would spend on.

More than half of the respondents in the Middle East believe that saving is very important, with a majority of consumers planning to save between 11 to 20 per cent of their total income in the next 12 months. In the UAE, saving is also a top priority with a majority of the consumers planning to save between 11 and 40 per cent of their income in the coming 12 months. Over the 12 months ahead, both males and females across the Middle East equally expect to save between 11 and 20 per cent of their total income.

issacjohn@khaleejtimes.com