UAE MasterIndex of Consumer Confidence holds steady

The current UAE MasterIndex score at 77.5 out of a possible score of 100 is very close to the 78.1 score received six months ago, indicating consumer sentiment is stable and optimistic. In the Middle East and Levant (MEL) the UAE ranked fourth in overall consumer confidence for the first half of 2006, down one place from six months ago.

In the latest survey UAE consumer sentiment on Employment increased from 69.5 in the second half of 2005 to 77.4, while positive sentiment on Quality of Life jumped from 65 to 74. However, these gains were offset by drops in sentiment on the Economy, down from 90.0 to 84.5 and Regular Income, down from 91.3 to 77.1

Commissioned by MasterCard International and conducted bi-annually in selected markets in South Asia, Middle East and Africa (SAMEA), the survey analyses consumers' perceptions of economic conditions over the six months ahead. The MasterIndex has a range of 0 to 100 with 50 as the mid-point. A score above 50 indicates that consumers are optimistic about the economic climate, while a score below 50 signals that consumers are pessimistic about the economic situation.

The countries surveyed include Egypt, Kuwait, Lebanon, Saudi Arabia, UAE, South Africa and India. The scores are based on respondents' answers to questions relating to five variables: Employment, Economy, Regular Income, Stock Market and Quality of Life. Bi-annual Master Index surveys have been held across SAMEA for the past two and a half years and across Asia Pacific for the last 13 years.

On a market basis, Kuwait (94.5 vs 90.7 six months ago) and Saudi Arabia (88.5 vs 98.5) topped the list of Middle East countries with the highest consumer confidence. These were followed by Egypt (83.0 vs 62.3 six months ago), the UAE, and Lebanon (51.3 v 59.2). India had a score of 76.4 (up marginally on 73.1 in the second half of 2005) and South Africa jumped to 91.1 from 71.2 six months ago.

Dr Bob Edwards, Partner and Director of Edwards Economic Research commented; 'In the fifth MasterCard survey of consumer confidence in the UAE, the overall MasterIndex of Consumer Confidence was stable at 77.5 - about the same as in the previous survey and 15 points down from the first half of 2005.'

'In the UAE, except for a sharp upturn in the first half of 2005, the MasterIndex has had a general downward trend over the last five surveys, at a time when most broad economic indicators have been extremely positive. This trend contrasts with the general impression of the unparalleled growth and opportunity in the country.'

'The individual components of the MasterIndex generally correlate with each other, so the perception of declining confidence is quite broadly based. Of the five components of the index, three declined between the second half of 2005 and the first half of 2006. The indicator on consumer confidence for the employment situation improved by nearly 8 points from 69.5 to 77.4.'

'The MasterIndex of the UAE stock market seems to have captured and predicted the market's turning point with a lead time of about two quarters. Dubai-based respondents to the MasterIndex survey lost confidence in the stock market somewhere between February and August 2005 - in other words, between three and nine months before the market peaked.'

'In the UAE, the weakest and most volatile component of the MasterIndex is consumers' perception of the quality of life. Large-scale new immigration has evidently played a major part in this phenomenon. Unprecedented competition for jobs and housing, traffic congestion, and treble-digit inflation in housing costs, are the areas of vulnerability in consumer confidence,' Dr Edwards concluded.

Overall confidence across the Middle East & Levant (MEL) improved in the latest survey with average confidence increasing from 78.1 six months ago to a record average high of 82.1. Since MasterIndex began in 2004 overall consumer confidence in MEL has increased steadily from the first average score of 66.1.

Survey results for the larger South Asia, Middle East and Africa (SAMEA) area show a similar trend of year-on-year improvement, apart from a slight dip in the second half of 2005. Overall SAMEA consumer confidence increased from 76.3 six months to a record 82.2 in this survey.