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 
 
¶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