Consumer spending is robust and economic optimism is high, according to National Bank of Kuwait’s (NBK’s) latest Economic Update.
Amongst the positive indicators, the value of spending on credit and debit cards at POS machines increased by 16.6% year on year in Q2 18. Total spending, which also includes ATM withdrawals, increased by 9.5% year on year.
According to the report, “Underpinning the pick-up in spending is optimism over the current state of the economy and its future prospects, fostered by expansionary budgets and higher oil prices. Ara’s consumer confidence index stood at 117 points in August and averaged 111 over the last 12 months, a level not seen since November 2014.”
The number of hires increased 2.9% year on year in June, with an increase in hiring of both Kuwaitis and expatriates.
On a cautionary note, public sector hiring was the main driver (at 2.9% year on year), while growth in private sector employment lagged at just 0.5% year on year.
Wage growth has been weak, with recorded average basic incomes for Kuwaitis enrolled in state pension plans little changed since 4Q16. Growth in gross average income, which includes basic wage income and benefits, eased to 0.6% in 1Q18, from a yearly average of 1.8% in both 2016 and 2017.
“Overall, the consumer sector will continue to see decent growth going forward but could moderate slightly from recent strong levels, affected by modest wage growth and a slight pick-up in inflation (from a very low base),” NBK concluded.
“An expected steady pick-up in non-oil growth, rising government spending and especially capital spending, as well as improved private sector investment – reflected recently by increased borrowing by businesses – will provide further support to the consumer sector.”