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Kuwait consumer spending seen to moderate on weaker income growth Employment growth appeared stronger in 4Q13

KUWAIT CITY, May 9: The consumer sector continued to grow more rapidly than the rest of Kuwait’s economy, though growth is expected to slow going forward. While household debt growth remained in the double-digits, it has moderated over the last twelve months. Point-ofsale spending growth also maintained a robust pace despite some moderation, as the benefits of the 2011 and 2012 salary hikes faded. Meanwhile, employment growth appeared stronger in 4Q13 following a bout of weaker figures earlier in 2013. At the same time, accelerating economic growth appears to be boosting skilled expat employment.

Household’s debt growth slowed to 15.1% through February, down from a 18.7% peak in June last year. Personal facilities excluding credit for the purchase of securities rose to KD 8.7 billion. Much of the weakness in February’s debt increase was due to the settlement and write-off of Family Fund loans which began that month.

We estimate that the family fund shaved KD 50 million off household debt in February; we expect March to see a still larger impact. Consumer spending remained relatively robust, though it has begun to moderate as well. Pointof- sale transactions (POS) in 4Q13 were up by 14% from a year ago, the slowest pace in over a year. If consumers’ cash withdrawals (ATM) are also included, spending softened to 9.1% in the final quarter of 2013.

Employment among Kuwaiti nationals remained relatively steady, though the latter part of 2013 saw some pickup.

First-time civilian hires (first-time PIFSS registrations) amounted to 12,300 in 2013, down from just over 13,000 the prior year. Still, net civilian employment growth was steady at 4.4% y/y (304,500 total employed).

Though the number of first-time hires by private employers was stable, net employment growth in the sector picked up to 8.1% from 5.9% a year ago. Skilled expat job growth has also been accelerating, seeing its strongest pace since 2009 on the back of brisker economic growth. Employed non-Kuwaitis with at least a secondary education rose by 10,300 during 2013, more than double the figure the year before.

Both the private and public sectors are behind this trend. The consumer sector is expected to continue to moderate in 2014 from a faster pace in previous years, though growth will remain healthy. Household debt growth is expected to moderate further while measures by the government to boost household income are likely to be limited. Still, employment growth should pick up pace, supported by the improving economic outlook this year and next.

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