Consumer sentiment rebounding, business struggles.

6th May 2021

The Sila Consumer Confidence Index update: April 2021

As the chasm in confidence between Saudi Arabia and the United Arab Emirates private sector grows; we’re also seeing greater separation between business expectations and economic sentiment among consumers more generally in the GCC’s two largest economies.

16 months of data

D/A has built out the region’s only sentiment platform that natively works in Arabic dialect (different Khaleej dialects in addition to broader region); Sila, and within it has a sentiment index that pools together the positive and negative discussion on social media about key items of concern to consumers. We exclude news sharing from this analysis and instead look to opinion.

Put simply, we use a proprietary Natural Language Processing (NLP) models to understand what consumers are feeling towards a topic, at scale.

The basis of the data is a continuous analysis of around 41.5 mn tweets over the last 16 months (excluding news articles) in Arabic dialect from the UAE and KSA that allows us to better understand consumers feelings, in real time, in their language and slang.

UAE Business Rebounding, KSA much slower.

Sentiment in the private sector in the UAE has recovered to a rate just shy of pre-pandemic levels. While we’ll see that’s a good, but overstated, thing, it’s worth taking stock of the rapid recovery; leading to a more measured return of confidence:

The UAE's business confidence index

The UAE’s business confidence index

When we compare that to business sentiment in Saudi Arabia, we see a different story entirely.

The KSA's business confidence index

The KSA’s business confidence index

Here we see a muted rebound in the private sector that is gradually getting its mojo back. An early view of January 2020 saw the business sentiment at a relatively even amount between positive and negative; followed by a sharp contraction in confidence. The recovery though, has been barely that with sentiment, some 14 months off the low, still only ±23% positive.

The implications of this can be far-reaching – but let’s first take a look at the sentiment around the economy.

UAE & Saudi sentiment improving on the whole economy.

While we see a muted business recovery in Saudi, we see a much stronger showing for sentiment in the economy:

The KSA's Economy confidence index

The KSA’s Economy confidence index

Why is this?

Well, more generally, Saudi’s economy is strongly driven by the government spending, oil price and government-related entities that control vast swathes of industry and real estate in the country. With oil above $60, and seemingly an announcement every other week, the population is bullish on the economy.

In fact, and strangely enough, consumers are more net-positive on the future of the economy than pre-covid January 2020.

The UAE is following a similar trajectory, albeit there is a plateau at net-positive with a slight plateau witnessed in April:

The UAE's Economy confidence index

The UAE’s Economy confidence index

The rapid recovery witnessed in November 2020; followed by the retreat in December/January, we saw a steady rise across February and March. As we stand, April will be fairly neutral with March’s confidence scores.

Let’s find out why.

What this means.

The rebound in Saudi here is at stark contrast with the UAE – but not unexpected.

We have two distinct differences in connectedness and government intervention that affects consumer sentiment:

  • The internationalised nature of the UAE economy is the primary driver. While the oil price certainly has an effect in Abu Dhabi, the largest economy in the UAE is Dubai; and that is very much interwoven with global connections. With events unfoldinging in India by the day, and the special relationship that country has with the UAE, we would expect confidence to take a hit. The same can be true for other COVID-19 hotspots and travel restrictions. The resultant impact, or slowdown (again, we’re net positive here!); is that growth is now more in line with what we would expect and not a rapid rise. This is especially true of the aviation sector, which has been an engine room of the UAE economy in recent years. We expect sentiment to grow to 70% net positive by September.
  • We can deduce from this that business is indeed getting better, but sentiment is at a series high. This is because although the economy has taken a hit and not recovered fully, it is at a series high, along with business sentiment. It seems the residents of the UAE are future-focused.
  • The Saudi economy, meanwhile, is being driven by the government. All recent announcements have focused on GRE’s or state-backed investment vehicles pushing to diversify the economy, with the private sector not fully engaged. This would give an indication of relative prosperity; particularly as the oil price stays around $60/barrel, while leaving behind the private sector as we can see by business confidence.
  • International movements are not therefore driving Saudi’s growth – but the worrying thing is the private business sector is clearly experiencing some significant downside in confidence, which will have a spill on effect in employment, which in turn has a big impact on consumer spending potentially – or in the shorter term, a more positive view of government employment.

What good is sentiment?

Lastly, understanding consumer sentiment is a powerful leading indicator of economic health. Understanding broad opinion; in this case from 41.5 million data sources, enables us in real-time to determine what the public thinks and feels about the things that matter to them at an unprecedented scale.

It enables us at D/A to develop communications strategy to either arrest a decline in sentiment, or capitalise in an uptick.

We continue to watch and stay tuned for our monthly updates.

This article was published on Linked-in by Co-founder of D/A, Paul Kelly.