Sunday, January 22, 2012

Saudi consumer confidence surges despite global gloom

JEDDAH: Saudi Arabia has retained second position in the Nielsen Global Consumer Confidence Index for the third quarter of this year released on Sunday.
Global consumer confidence, however, remained weak in the third quarter with more than 60 percent of consumers saying it was not a good time to spend, and one-in-three North Americans saying they have no spare cash.
The surge in Saudi Arabia and Brazil masked weak confidence in major developed economies, global analytics and information company Nielsen said.
Confidence was highest in India for a seventh straight quarter but India’s reading fell 5 points from the second quarter and Saudi Arabia was catching up.
“The exceptional consumer confidence number for Saudi Arabia is a huge vote of confidence for the economic policies being implemented by the government, and, in particular, the positive effect of the recent government initiatives,” Khan H. Zahid, vice president and chief economist at Riyad Capital, said.
“With high oil prices and a strong foreign asset position, consumers see this as a sustainable policy for growth without causing inflation. We project economic growth in the Kingdom to probably surpass the 7 percent level this year,” Zahid added.
The Nielsen Global Consumer Confidence Index dipped just 1 point in the third quarter from the second quarter to 88 points, Reuters reported Sunday.
The UAE was among the top 10 countries in the world in terms of consumer confidence.
Commenting on the Nielsen report, Jarmo T. Kotilaine, chief economist at the National Commercial Bank, told Arab News: “This survey data suggest that Saudi Arabia is now one of the most optimistic economies globally. This reflects the reality that the Kingdom is among the small number of countries globally that are actually seeing an improvement in their economic prospects. The resilience of the oil price, historically high production levels and increased government spending in key priority areas are successfully feeding through into improved consumer and investor sentiment.”
He said the positive picture is also supporting a gradual pick-up in bank lending, which augurs well for private sector activity. While the annual rate of credit growth is still below pre-crisis levels and not very high in real terms, it has been fairly consistently edging toward the 10 percent mark, which suggests that the period of suspended motion both in terms of credit demand and supply are finally over, he added. This is in part because banks have largely dealt with the challenges of bad loans and now drawing additional comfort from the increased levels of economic activity, he said. “All in all, Saudi Arabia is likely to be economically one of the global top performers this year and it is encouraging that consumer sentiment has caught up with this reality even if some of financial markets still remain depressed,” Kotilaine added.
Paul Gamble, head of research at Jadwa Investment, said: “It is not a surprise that Saudi Arabia has one of the highest levels of consumer confidence in the world. High levels of government spending and a strengthening private sector are shielding the economy from the difficulties being faced elsewhere.
“Unlike most of the leading economies in the world, Saudi Arabia has an enviable debt position; with very low debt and reserves of over $500 billion (reserves climbed by nearly $17 billion in September alone).”
Furthermore, Gamble said: “Most consumers have benefited from a salary bonus earlier in the year. Although new data indicate that the boost to consumer spending triggered by the bonus for public-sector workers has faded, with government spending set to remain high, the economy will continue to perform well. It is therefore likely that consumers in the Kingdom will remain confident about the outlook.”
Consumer morale in the euro zone remained especially weak, notably in France, as the region’s debt crisis deepened during the summer. Confidence in Greece, at the center of the crisis, actually rose sharply but it was still the fourth weakest of the markets surveyed. Confidence was lowest in Hungary, Reuters said.
One in five Europeans said they have no extra cash to spend, although that was better than one in three North Americans.
The survey, taken between Aug. 30 and Sept. 16 and covering 28,000 consumers in 56 countries, revealed 64 percent of consumers globally felt it was not a good time to spend.

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