Confidence dips, but business investment plans at all-time high
Business and consumer confidence have dipped for the second quarter of 2014, but business investment plans have reached all-time highs, according to the latest results from the Jamaica Conference Board.
The two indices fell by four percentage points over the previous quarter, but there is still a "fair amount of buoyancy and expectation that the economy will turn around", said Don Anderson, managing director of Market Research Services.
Despite that, there is "still a reverberating echo of difficult times", Anderson said. The indices are probably at about an average level for their 13-year history, he said at the release of the second-quarter survey results.
The indices are still above confidence levels seen a year ago and for the last quarter of 2013.
In the previous quarter, firms and consumers underestimated the economic challenge and overestimated their expectations of gains, Anderson said. "Nonetheless, neither firms nor consumers doubt the necessity of policy changes," he said.
Hope rests in the positive gains that are taking place in the economies of traditional trading partners as well as Jamaica passing all of its IMF tests to date, Anderson said.
The index of business confidence stood at 112.8 compared to 117.8 for the previous quarter. But the rate was well above the 101.4 for the second quarter of 2013 and the 91.8 a year before that.
The four percentage point drop over the previous quarter "is nothing to be concerned about", according to Anderson, who said despite the downturn in the economy, "investment plans are very strong".
In fact, investment plans are at an all-time high, with 55 per cent of businesses reporting that it was now a good time to expand their productive capacity, he said.
The index of consumer confidence fell at the same rate as the business index, down to 100.8 compared to 104.7 in the previous quarter.
"The four per cent fall is not unusual," Anderson said.
The rate of 100.8 was about equivalent to the 99.9 for the second quarter of 2013, though below the 111 recorded a year ago.
On the positive side, there was a slight uptick in consumers' outlook for jobs, though current job prospects were down to only 10 points, compared to 15 points in the previous quarter
Consumers have a "dismal" perspective on business conditions, and they don't expect their standard of living to improve, Anderson said
That has hit their purchase plans, with consumers being "more and more realistic of their situation", he said. Consumer purchase plans were at or near record lows, with home-buying plans for the year ahead down to seven percent and vehicle purchase plans down to just 10 per cent only seven per cent.
Only 22 per cent of consumers said they had vacation intentions - barely above the all-time low of 20 per cent during the height of the last recession.
Meanwhile, remittances have been on the increase, with 37 per cent of respondents from all socio-economic groups saying they receive funds from abroad, an increase of one percentage point.
Consumers are clearly "feeling the pinch" and are relying more on remittances for their daily existence, Anderson said.
A total of 600 consumers across the island and 100 businesses were polled for the survey.