Identifier
Created
Classification
Origin
09ABUDHABI239
2009-03-12 11:49:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Abu Dhabi
Cable title:  

UAE RETAIL SALES DECLINE WITH CONSUMER CONFIDENCE

Tags:  ECON EFIN ETRD AE 
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VZCZCXRO7467
RR RUEHDE
DE RUEHAD #0239 0711149
ZNR UUUUU ZZH
R 121149Z MAR 09
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC 2235
INFO RUEHDE/AMCONSUL DUBAI 8191
UNCLAS ABU DHABI 000239 

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN ETRD AE
SUBJECT: UAE RETAIL SALES DECLINE WITH CONSUMER CONFIDENCE

UNCLAS ABU DHABI 000239

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ECON EFIN ETRD AE
SUBJECT: UAE RETAIL SALES DECLINE WITH CONSUMER CONFIDENCE


1. (SBU) SUMMARY: The local impact of the global financial crisis
has contributed to weakening UAE consumer confidence. As sales
fall, retailers have cut prices for essential goods, diesel, used
cars, and luxury goods. Emirati nationals report they are delaying
purchases with the hope prices will decline further, while
expatriates say they are cutting expenditures in response to general
economic uncertainty. Some retailers have cut prices in an effort
to stimulate consumption, although others hope demand will recover.
End Summary.


2. (SBU) Like consumers elsewhere, Emirati and expatriate contacts
report they are postponing major purchases in response to economic
uncertainty. While Emiratis are delaying with the hope prices will
decline further, expatriates say they are affected by weak global
consumer confidence and general uncertainty about their own economic
situation and, in some cases, future in the UAE. Although inflation
has fallen from the double digit rates of early 2008, Minister of
Economy Sultan Al Mansouri recently reported 2009 inflation is still
expected to exceed five percent. Thus, many consumers continue to
complain the price of everything from food to housing is high and
rising.


3. (SBU) Weak consumer confidence, and falling global commodity
prices, have had a notable effect on local retail sales and prices.
Along with falling real estate prices, the prices of some essential
goods, fuel and some durables goods began to decline in mid-2008.
According to the Abu Dhabi Department of Economy and Planning
Statistical Center Price Index, prices of over 40 percent of
essential goods decreased in January 2009 by 4 to 10 percent.
Dubai-based oil retailers Emirates General Petroleum Corporation
(EMARAT),Emirates National Oil Company (ENOC) and Emirates
Petrochemical Products Company (EPPCO) have reduced diesel prices 15
times from a July 2008 high of Dh 19.25 (USD 5.24) per gallon to Dh
10.10 (USD 2.75) today.


4. (SBU) While some price cuts are a result of government efforts to
combat inflation, local retailers report they have cut prices in
response to declining sales. A sales executive from Paris Gallery,
the leading luxury retailer, said sales dropped about 30 percent
since January 2009. As a result, they have reduced their prices 10
to 15 percent. Similarly, used-car prices in Abu Dhabi have fallen
around 20 percent since December 2008. The General Manager of
Al-Otaiba Group, an Abu-Dhabi based retailer for Land Rover, Isuzu,
Chevrolet and Cadillac vehicles and spare parts, claimed that their
business was not affected. However, Dubai-based General Motors
Middle East noted to the Consul General that retail sales of their
main UAE brands (Chevrolet, Cadillac, GMC) were trending down from
last year on a month-by-month basis, despite stepped up marketing
and attractive financing offers, as were all new cars sales with the
exception of Hyundai and Kia, whose dramatic price cuts have upped
their retail sales.


5. (SBU) Comment: While consumers welcome declining retail prices,
falling sales represent another indication the UAE economy is
feeling the impact of the global financial crisis. Along with
cancelled construction projects, redundancies and tight liquidity,
declining retail profits suggest the economic slowdown will continue
through 2009. End Comment.
OLSON