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Slow cash transactions in high-shopping season

Published:Sunday | January 9, 2011 | 12:00 AM

Sabrina Gordon, Business Reporter

Reflective of the dampened shopping season, transactions through the MultiLink system rose in December, but by a marginal four per cent, slower than the pace of previous years.

"If sentiments are positive, spending will surge, if not, people will pull back to the bare essentials," said Edmundo Jenez, general manager of JETS, the electronic funds-transfer company that processes MultiLink transactions.

The network processes card transactions on behalf of Jamaica's top banks, building societies, and credit unions. It accounts for about 25 per cent of all debit-card activity, with the transactions processed being used as a proxy for measuring cash movement and shifts in retail activity.

For the month of December, transaction activity through the ABM MultiLink network totalled $8.37 billion, a four per cent increase over last year.

Total withdrawals, however, dipped 1.87 per cent to $1.63 billion compared to $1.66 billion for the corresponding period last year, confirming, said Jenez, the contraction in the economy.

"As we have observed the consumer-spending patterns over the years, the public is very sensitive to their economic well-being, and this is transmitted to their immediate spending activity," he said.

Reduced spending

Within the month, point-of-sales transactions performed better than activity seen at ABMs.

The announcement of tax changes in December also had an impact on consumer-spending behaviour.

"This is the second Christmas season that we have seen the powerful effect of tax announcements that send signals of uncertainty to the public resulting in reduced spending," said Jenez.

"The timing of these announcements in this season can have a chilling effect for consumers, merchants, and ultimately, tax receipts on consumption."

The MultiLink manager said December 16 was most affected, with a 33 per cent pull-back compared to the corresponding day in 2009, "presumably due to public response to the tax announcements and deferral of the early payday," he remarked.

Christmas Eve, December 24, while producing less cash demand at $576.3 million, recorded a larger volume of transactions, 100,532 withdrawals, which was about 7.96 per cent more activity compared to the normal peak money-demand day, December 23.

An explanation was not immediately available for the shift, but Jenez noted that consumer spending patterns are affected by their general sentiment.

Also still weighing on consumers, he said, are the recession, Jamaica Debt Exchange, the state of emergency in May, and the effects of Tropical Storm Nicole. Based on those events, projections for Christmas spending were for low activity. "Despite all the ups and downs, we were essentially on target, with the December monthly forecasted demands consistent with the expected flat annual performance," said Jenez.

For December 2010, the average ABM withdrawal was $5,126, up 6.23 per cent over the $4,827 average in December 2009.

The average point-of-sales withdrawal was $4,543, up 6.7 per cent over the $4,258 in 2009.

During the season, the MultiLink network processed transactions for approximately 385,000 cardholders at 507 ABMs and 8,359 point-of-sales units.

Jenez expects 2011 to produce better results.

"Now that the majority of the factors from 2010 have been absorbed by the public, we may see some improving trends in the future if the general tone of the economy moves to the positive side," he said.