(MENAFN- Arab Times) The consumer sector remained strong thus far in 2013, though there are some signs that rapid growth is beginning to moderate. Household debt maintained solid but steady growth through June and point-of-sale spending growth was still in the double-digits in the first half of this year. Employment growth was relatively steady, in particular among Kuwaiti nationals and skilled expats. The latter two groups are crucial to the consumption sector as they comprise higher income households.
Consumer spending growth has remained healthy, supported by the strength in consumer borrowing. Consumers' point of sale transactions (POS) recorded a value of KD 3.25 billion during the first half of 2013 (1H13), up 17.9% from a year ago. Spending has also received support from steady employment growth, especially among Kuwaiti civilians. Higher salaries for Kuwaitis in the public and private sectors were also an important factor, having taken effect largely during the second half of 2012, and continued to have an impact on year-on-year (y/y) growth.
Consumer and installment debt growth recorded a healthy pace through June, with outstanding debt reaching a mid-year figure of KD 7.6 billion. Growth against a year ago eased slightly to 18.3% compared to March's 19.3%, but remained surprisingly resilient. The net increase in loans averaged a monthly KD 103 million during 2Q13, up from KD 78 million during the first quarter and KD 93 million in 2012 as a whole. Growth in total wages of Kuwaiti civilian employees is estimated to have accelerated to 15% by 1Q13. This rise in aggregate wage income, which captures growth in both salaries and employment, has benefited from a package of wage hikes implemented last year both for public employees and the private sector. With no new hikes in 2013, this growth is expected to taper off towards the end of 2013. However, continued healthy growth in employment should keep income growth running at a relatively solid pace into 2014.
Consumer confidence picked up towards the end of 2012 and has largely maintained elevated levels thus far in 2013, reflecting solid consumer sentiment. Though the Araa consumer confidence index slipped slightly to 117 in July compared to the 126 level registered in December 2012, it remains relatively healthy. Consumers' improved sentiment was most obvious when it came to employment prospects. The employment component of the index rose 18% from a year ago. Consumers were also more optimistic about the performance of the general economy than they were a year ago. Consumers were not much more optimistic about the prospects of seeing growth in their household income than last year, though even this component saw an improvement.
Employment growth among Kuwaiti nationals has seen a slight pickup in 2013 following a moderating trend last year. Aggregate Kuwaiti employment saw year-on-year growth accelerate slightly to 3.3% from 2.8% at the end of 2012. Total working Kuwaitis rose to 394,000 by the end of June, including civilians and military positions. The net increase in the number of working Kuwaitis below the age of 40 during the last 12-months was nearly 18,700, compared to 19,300 added the year before. Labor participation rates have remained relatively stable and even improved in some cases, indicating that unemployment has remained in check. Among men, the rate has been unchanged at 90% for the last two years. Meanwhile, Kuwaiti women's participation rates has maintained a rising trend, with 82% of the 25-40 year age group in employment at the end of June 2013, compared to 81% a year ago and 80% in 2011.
In addition, the data also indicates that women are now retiring later. Private sector hiring of Kuwaitis was stronger in 2013. Over 5,100 of the net increase in employment was in the private sector, compared to 3,500 a year ago. Private sector hiring appeared to hit a low during the first half of last year, when the number of net new jobs fell to 1,150. It has since picked up, with net job creation in 1H13 standing at more than double the size of the year before at 2,900. Skilled expat job growth was also stronger during the first half of 2013 following a flat 2H12. However, an initial recovery seen in late 2011 and early 2012, which saw growth accelerate to 2.2% in the wake of the 2009 recession, appears to have moderated as growth (y/y) slowed to 0.7%. Employed non-Kuwaitis with at least a secondary education rose by around 3,100 during the first half of 2013. Total skilled employment stood at 350,000 at the end of June 2013.
Strength in consumer spending is expected to be sustained through 2013, as employment growth remains solid and consumer confidence high. Household credit growth will continue to provide strong support though we can expect the pace of growth to moderate somewhat by the end of 2013. As for 2014, we can expect stronger non-oil GDP growth to further support private sector job creation, both among Kuwaiti nationals and skilled expats, the two pillars of consumer spending in Kuwait.
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