JEDDAH – The Saudi Arabian consumer remains one of the most optimistic, with a net 33 percent of respondents expecting to see improvements in the state of their personal finances, Credit Suisse Research Institute said Monday its third annual Emerging Consumer Survey. However, this optimism has slipped slightly from last year, it added. More significantly, the report noted a reversal of what had been a rather broadly based level of optimism in 2011 to a more obvious contrast between expectations for the rich and poor. Fifty six percent of the richest respondents expect a financial improvement but less than half of that are at the lower end of the scale. In 2011, the report saw significant increases in public sector incomes, which provided the backdrop to the survey for Saudi Arabia. The minimum wage for government employees was nearly quadrupled – a figure matched in the private sector. This coincided with a range of job creation initiatives and other social provision. It not only contributed to a buoyant consumer position, but notably also increased optimism among the lower and middle-income earners. It appears as if this momentum has now declined and optimism has slipped as the positive impact on sentiment is dropping year on year, the report added. Moreover, the report said incomes are expected to grow in the Kingdom but with growth highest where incomes are highest. Against this backdrop, computers, smartphones, fashion apparel and perfumes stand out. In contrast, low ticket and essential spending such as food and dairy remain low. “In our view, there remains a huge structural opportunity in the financial industry as the pool of savings deepens further and providing it can be tapped effectively. The implied savings rate stands at around 30 percent of growing incomes, only a whisker away from the trend rate of savings in China. The focus remains predominately on savings held in bank accounts (the bulk of which offer zero returns on deposits) or in cash itself,” Credit Suisse said. Profiling consumer sentiment within the BRIC nations (Brazil, Russia, India and China) alongside those of Turkey, Saudi Arabia, Indonesia, and, for the first time, South Africa, the report said these consumers represent over 3.3 billion people across the globe. Stefano Natella, Global Co-Head Securities and Analytics Research at Credit Suisse, said: “Our survey provides a unique and detailed analysis of consumer sentiment in the emerging world and importantly an understanding of its underling drivers. Its reflection of the differing demographics, income, and urban/rural characteristics of emerging consumers are vital considerations when it comes to determining spending preferences and the brand positioning of companies.” The report noted that in general, consumer confidence is improving, “but a picture of contrasts.” This year's survey showed that confidence among emerging consumers has strengthened over the course of the last year. Of just over 14,200 adults included in the survey across eight countries, 37 percent thought their personal finances would improve over the next six months and 9 percent expect some deterioration (a net 3 percent improvement over last year.) However, the improvement isn't uniform. Optimism is highest in Brazil, China, Indonesia and Saudi Arabia and lowest in South Africa, Russia and Turkey, albeit improving. Besides, the outlook for and the distribution of income has become the key determinant of optimism this year. Accordingly, the countries with the highest income growth expectations show the greatest optimism. Equally notable is the fact that the highest income earners are the most optimistic in every country and in a number of instances these consumers are clustered in the younger age brackets of the working population. Understanding what these younger, affluent and typically more-educated consumers is a key investment theme. Given the generally healthier household balance sheets and much lower levels of private sector indebtedness relative to GDP that are apparent across the emerging markets, it would be plausible that low nominal rates would start to feed through to higher rates of credit extension in these regions, the report noted. However, it added that this is typically not the case. Even in Brazil, where nominal rates have dropped 3.5 percent since mid-2010 to now, the proportion of spending on credit cards has hardly moved from the 19.2 percent recorded in 2010. — SG
