UAE consumer confidence falls but remains positive

Dubai: Consumer confidence in the UAE has declined in the past six months, according to the latest MasterCard Worldwide Index of Consumer Confidence findings for the first half of 2008.

From a score of 88.8 six months ago out of a possible score of 100, the UAE index came down to 78.5. Indications for the UAE are that consumer sentiment is overall positive and optimistic with a high index score.

In the Middle East and Levant, the UAE ranked third in consumer confidence with Kuwait (93.3) and Saudi Arabia (92.2) ranked in the first and second positions.

Compared to the second half of 2007, the current index score on four of the five economic factors, such as regular income (70.3 vs 92.2 six months ago), employment (85.6 vs 95.2) and to a lesser extent, stock market (73.4 vs 81.5) and economy (87.1 vs 96) have seen the biggest decrease in index score.

This demonstrates consumers are clearly less optimistic than they had normally been.

Commissioned by MasterCard Worldwide and conducted bi-annually in select markets in South Asia, Middle East and Africa (Samea), the survey analyses consumers' perceptions of economic conditions over the six months ahead. The index is the mean score of the five relative indices.

The relative indices measure the relative optimism of the respondents in employment, economy, regular income, stock market and quality of life. The relative indices are computed using the percentage of optimistic replies divided by the percentage of optimistic and pessimistic replies multiplied by 100.

"We find a strong correlation between consumer confidence and retail spending. Overall the Gulf region enjoys high confidence levels.

"The decline of confidence level in the UAE seems to have come from the impact of inflation on the regular income expectations of people," said Denzil Lawson, general manager, ME&L, MasterCard Worldwide

In the Middle East, Egypt reported the sharpest fall in consumer confidence (65.9 vs. 94.3 six months ago) while Lebanon's consumer expectations remained subdued (38.7 vs. 38.6). India posted a big surge (86.6 vs. 63.6) while South Africa continued to remain highly optimistic (83.7 vs. 80.7).

"Comparing the consumer economy confidence variable of the MasterCard Worldwide Index of Consumer Confidence with the International Monetary Fund's real GDP growth rates for the economies of the region, we can see that both consumer sentiment and the change in the growth rate tend to move together," said Dr. Nasser H. Saidi, chief economist of the Dubai International Financial Centre.