Consumer confidence in the UAE has weakened over the past six months although it remains higher than elsewhere.
Consumer confidence begins to flag
DUBAI // Consumer confidence in the UAE is being tested by the global financial crisis. The latest Nielsen Global Consumer Confidence Index, released yesterday, shows the confidence of people in the Emirates is down slightly from six months ago, although it is still high by world standards. The biannual index gauges consumer confidence based on sentiment regarding a country's job prospects. It is based on a series of factors including the status of personal finances and an individual's spending on necessities and luxuries. The UAE ranked third - behind India and Denmark - among the 52 countries surveyed, up from fourth position six months ago. However, the country dropped one index point since the previous survey, and has fallen three points this year. Despite the latest slight drop in confidence, Piyush Mathur, Nielsen's regional managing director of the Middle East, North Africa and Pakistan, pointed out that the deterioration was much worse in many other areas of the world. "We measure on a 200-point scale, so when the world is neutral, the survey average is 100. Currently we are at 84," he said. "If you look at the UAE being at 110, it is just above neutral, whereas Egypt is at 75 and [South] Korea is at 36 - that is a very gloomy picture." The survey polled 26,202 online consumers between Sept 26 and Oct 6. Nielsen officials admit that given the shocks to the financial system last month, the next survey could reveal more gloomy sentiment. "The region is not completely immune to what's happening in the rest of the world and we will see a slow down," said Mary Nicola, an economist with Standard Chartered Bank. "Equity markets are falling, simply based on market sentiments that the world is slipping into a recession." Egypt, the only other Middle East country to be surveyed, experienced a three-point drop in confidence since the previous index was released. Of the 10 top-ranking countries, only Brazil and the Philippines saw an increase in consumer confidence. All but eight of the 52 countries surveyed fell on the index - South Korea and Taiwan losing 28 points. Mr Mathur also noted the low rankings of the US, which scored 82 and Japan, which measured only 44. "It is very easy to steer a ship when it is sunny, but when the rain hits it is a different story," said Robert Ziegler, the vice president of management consultancy AT Kearney in Dubai. "People [in Dubai] have been irrationally optimistic, and I think it will catch up to them." The overall economy and surging food prices were among the top-ranking concerns for the 500 people surveyed in the UAE, with 12 per cent citing the economy as being at the forefront of their concerns. Other issues of considerable importance to Emirates' respondents were maintaining a healthy work-life balance, ensuring job security, children's education and welfare issues and increasing bills. Should the economic situation worsen to the point where disposable incomes were hit, respondents revealed how they would try to budget their spending, with 55 per cent saying they would spend less on clothes, 47 per cent would try to save on electricity and gas and 43 per cent would trim out-of-home entertainment. The surging cost of living has been a key concern across the region over the past year. Inflation in the UAE hit a 20-year high of 11.4 per cent last year and was expected to rise to 11.8 per cent this year, a Reuters poll earlier this year showed. Food, beverages and tobacco accounted for 11 per cent of that rise, according to the Emirates Society for Consumer Protection. However, with oil prices slumping to their lowest levels in 19 months, food prices have eased considerably, shifting global concerns from inflation to economic growth. Mr Ziegler said that for the UAE, the tough times were still to come. "You can't build retail space for three times the number of people and real estate for 10 times the number of people and you can't put all your money into stocks and expect the markets to stay up," he said. "People here will eventually start feeling it in their own pockets, and then the reaction will be severe." email@example.com