Consumer confidence rises to new high - Businesses concerned about sliding dollar
Consumer confidence in the third quarter of 2018 was recorded at 172.6 points, up from 159.1 in the second quarter, the highest level since the survey began in 2001 and was largely attributed to their views of current and future job prospects.
However, business confidence remained the same at approximately 140 points as firms' expectations for economic growth waned and their willingness to invest in new plant and equipment dipped, primarily because of the depreciation of the Jamaican dollar against the United States currency.
Notwithstanding that, "firms are still bullish on investment", said Managing Director of Market Research Services, Don Anderson, in presenting the findings of the survey undertaken for the Jamaica Chamber of Commerce/Jamaica Conference Board.
Consumers who anticipated income gains rose to 50 per cent during the quarter, up from 45 per cent in the second quarter, but down from the 53 per cent recorded in the first quarter of this year.
That represented a change over the second quarter survey which showed that consumers were not as confident about benefiting from the positive business climate they had observed in the second quarter, Anderson said.
POSITIVE ON JOBS
The report also said that 35 per cent of consumers received remittances during the review quarter, down four per cent when compared with the second quarter, but bringing the year-to-date average to 36 per cent to match the 2017 average.
Consumers' assessment of current economic conditions grew by approximately 36 index points since the first quarter of 2018, while their expectations for the future grew by nine points.
In the third quarter, 37 per cent of consumers expect an improved year ahead for the economy, the positive views driven mainly by 23 per cent of them perceiving that jobs will be created, and 22 per cent expressing confidence at the Government's efforts and initiatives.
However, 33 per cent of consumers remained convinced that the economy will get worse, citing as their main reason the view that there is instability in the value of the Jamaican dollar against the United States currency.
Among businesses, 48 per cent of them reported that they expect the economy to improve in the next 12 months, down from 64 per cent in the second quarter this year.
Anderson said that of the variables which make up the overall business index, 'expectations for the economy' was the only one in which a notable smaller proportion of firms reported that they expected improvement.
Firms' willingness to invest in new plant and equipment dipped to 136 points, a four-point difference from the 140 points recorded in the first quarter of 2018.
However, 64 per cent of the firms surveyed agreed that the time was right for expansion, exceeding the 58 per cent average last year.
Just over half of the firms reported having solid plans to increase their level of capital investment in the companies over the next 12 months.
Anderson said that for the first time in several quarters businesses have not cited crime and its associated costs as the main barrier to their plans for expansion.
Rather, they cited the depreciation of the Jamaican dollar against its United States counterpart as the main factor that is adversely affecting investment plans. The survey was conducted between July 6 and September 25, a period which saw the Jamaican dollar depreciated to the $136 mark against the US dollar. It has since appreciated to around $134.
When firms were asked to assess the financial prospects of their businesses, 76 per cent said they expect gains in the year ahead and 67 per cent expect improvements in profitability, up six and eight per cent respectively since the first quarter of this year.
Anderson said their responses were based on internal strategies they planned to undertake rather than a buy-in to government policy.
More than half of the firms surveyed, 58 per cent, reported that profits were as expected, while those reporting disappointing profits dipped to 25 per cent, compared with 28 per cent in the second quarter.