Sat | Feb 29, 2020

Future business expectations at three-year low

Published:Friday | October 12, 2018 | 12:00 AM
This file photo shows the New Kingston business district. Jamaican executives are optimistic about business in the short term, but less so than two years ago. File

Top company executives expect business conditions to improve over the next 12 months, but their optimism about the future is at its lowest levels in three years, according to the Inflation Expectation Report released by the Bank of Jamaica, BOJ, this month.

The Future Business Conditions Index decreased to 120.2 points in the latest July survey, relative to 126.1 points in the previous survey for the May quarter. It is also the lowest level since September 2015 when expectations clocked in at 114.6 points.

"Both indices for the Present and Future Business Conditions reflected a lower level of optimism relative to the previous survey," stated the report compiled from surveys conducted by the Statistical Institute of Jamaica, Statin, and published by the central bank.

Chief executive officers, managing directors and financial controllers are surveyed about the future movement of prices, current and future business conditions, and the expected rate of increase in wages/salaries. These responses assist the central bank in charting future policy decisions. The most recent survey was conducted between June 25 and July 27, 2018 and had 263 respondents.

Expectations are positive at the 120.2 points estimated in July. It means that those expecting positive conditions outweighed respondents who were pessimistic.

However, in the same survey, the Present Business Conditions Index decreased to 101.9 relative to 114.9 recorded in the previous survey.

The BOJ did not immediately respond to requests for comment on the report.

The business leaders surveyed expect all macro-indices to worsen over the short term. This includes the perception of inflation control, which worsened in the July survey relative to the May survey. Respondents anticipate that the currency will depreciate over all three surveyed time horizons which span three months, six months, and 12 months. And respondents in the July survey anticipate marginally higher inflation of 4.8 per cent for the calendar year than those in the May survey, who then expected 4.7 per cent inflation.

Inflation for the fiscal year 2018-19 is forecast to fall within the target range of four to six per cent by the central bank.

As of August, inflation, which is measured by Statin, was trending at 1.6 per cent calendar year to date and at 1.9 per cent for the fiscal year to date, while annual inflation was back on the rise at 3.9 per cent.