Consumer spending fell sharply over the past few months as personal incomes shrank because of job losses and salary and commission cuts, an Emirates Business survey has revealed.

Even many residents whose salary levels have not been hit are saving for a rainy day in case they lose their jobs or suffer a pay cut, said leading retailers who took part in the study.

A significant proportion – 22.22 per cent – said they had seen a 21 to 30 per cent decline in spending this year.

"Since the onset of the downturn retail demand has weakened," said JP Nambiar, Head of Retail at Jumbo Electronics. "Consumers are hunkering down as they try to repair their personal balance sheets."

However 38.9 per cent of respondents put the decline at between 11 and 20 per cent, while another 27.77 per cent estimated the slowdown in sales at a more manageable five to 10 per cent.

Shivanand Hebbar, Division Manager at Swiss Arabian Perfumes (UAE Distribution), said: "UAE residents are waiting and watching the global situation. Sometimes it is true that people and industries have overreacted, even if things are still under control and improving."

Sales of luxury goods and products, which are dependent on discretionary spending, are the most obvious victims of the growing frugality among local consumers.

Nambiar added: "The electronics business relies primarily on discretionary income. Sales revenues are under pressure as many consumers are in saving mode, and those who spend tend to trade down."

Interestingly 11.11 per cent of the respondents claimed to be immune to the slowdown, saying they had yet to witness any cutback in consumer spending.

Asked to explain the trend, Panos Manolopoulos, Managing Partner, Middle East and Global Head, Consumer and Retail at Stanton Chase International, said: "The recent international economic turmoil and the redefinition of the markets' balances have led to unquestioned and long-term changes in the consumer's profile and purchasing behaviour.

"A significant dimension of these changes is the fact that they purchase less but visit the stores or supermarkets more frequently, while they have also accepted the value of own-label products, giving discount retailers a new power in the market."

As consumers increasingly look for value-for-money deals, retailers are being forced to cut prices – and profitability – in order to move stock.

The vast majority – 83.3 per cent – of retailers who participated in the survey said shoppers were looking for better deals. "It's a given now," said one.

Kamal Vachani, Director at Al Maya Group, said: "Worldwide the prices of commodities have come down and retailers are offering better discount and better value to consumers."

Nevertheless, there are retailers who have stuck to their pricing structures despite the weak demand.

A senior executive at one of the country's leading homegrown fashion labels said: "Our prices have remained stable despite the recession fever."

And another retailer with a stronghold in the hypermarket segment in the country said: "We have not witnessed any decrease in spending in the grocery or hypermarkets sector."

A resounding 100 per cent of respondents believed the growing number of shopping malls in the country would hit their profitability.

Vachani added: "In the present situation, yes, but as and when the situation improves the increasing number of shopping malls in the UAE will not be a problem."

Eighteen leading retailers across the country participated in the survey.