BOJ survey finds high confidence among CEOs
Business executives are more confident than ever in three years of tracking, and it's aided by slower currency depreciation, low inflation and stable interest rates, according to the latest Survey of Businesses' Inflation Expectations published four times yearly by the Bank of Jamaica (BOJ).
The findings corroborate a separate private sector led survey - organised by the Jamaica Conference Board of the Jamaica Chamber of Commerce - which came to the similar conclusion at the end of last year that confidence hovers at record levels.
For the current expectations survey, the Statistical Institute of Jamaica compiled the views of 307 chief executive officers, managing directors and financial controllers who were interviewed between November 21 and December 16. BOJ uses these types of surveys to inform and assist in shaping monetary policy.
The central bank started tracking confidence in December 2013.
"In the December 2016 survey, the perceptions of both present and future business conditions improved," stated the report.
"Future Business Conditions rose to 186.4, the highest in the survey's history, from 169.1 in the previous survey. Both indices primarily reflected declines in the proportion of respondents of the view that conditions are or will be worse," BOJ said.
At the same time, businesses expect the dollar to depreciate by 2.7 per cent during 2017 or to roughly $131.52, according to the survey. The expectation reflects a more bullish outcome than seen in 2016 when the Jamaican currency shed 6.7 per cent of its value to close the year at $128.44 against the USD.
The amount of depreciation changes based on the sentiments felt during a given period. So in the October survey respondents believed that the dollar would depreciate by 4.2 per cent in 12 months. While the September survey respondents expected 4.4 per cent depreciation over 12 months.
In the December 2016 survey, the majority of respondents expected BOJ interest rates to remain the same over the next three months. This proportion increased relative to the previous survey.
"For the financial sector respondents, there was a decline in the proportion of respondents that thought the rate would remain the same. Concurrently, there were increases in the proportions that expected rates to be marginally lower and higher," stated the BOJ.
The inflation rate for 2016 was 1.7 per cent. Businesses expect inflation for the 2017 calendar year to hit 3.3 per cent, which is a moderation of the 3.8 per cent expected under the previous survey.
The survey added that businesses expect the largest increase in production costs this year to come from stock replacement, followed by utilities, raw materials, fuels and then wages and salaries.