Rising unemployment and the continuing depreciation of the Jamaican dollar have weakened domestic demand, reduced revenues and profits, leading to a plunge in business confidence to the lowest level since 2009.
Consumer confidence also fell to the second lowest level during the past 12 years, largely because of less-favourable prospects for incomes and jobs, the Jamaica Conference Board reported in its third-quarter 2013 survey on Tuesday.
A more pessimistic business sector was found in just two other surveys which the Conference Board has been conducting since 2001.
"This data is very negative," admitted Professor Richard Curtin, head of the Survey Research Center at the University of Michigan, after presenting the findings.
Jamaica has entered into a new bailout programme with the IMF amid continuing economic contraction and debt levels that have reached 147 per cent of GDP.
Curtin said that having examined the fall-off in both business and consumer confidence, based on the open-ended responses, respondents were not blaming the bad picture on what government has done, but rather what government has not done.
However, he said they were informed and expected improvement in the economy.
Businesses and consumers talk in self-interested terms, he said, adding that "they knew they would get squeezed, but not squeezed to death".
After listening to Curtin, a woman in the audience asked whether any government official was on hand to respond to the findings, but none was in attendance, although a Jamaica Chamber of Commerce official said they were invited.
During the third quarter, all components of the business confidence index fell, although the largest declines were how firms viewed the outlook for the national economy and, consequently, how they judged prospects for their own investment spending.
The index of business confidence was 84.1 in the third-quarter survey, down from 101.4 in the second quarter.
Although firms expect the benefits from the new government policies to be worth the costs, the benefits accumulate slowly over time but the costs are immediate, the report said.
"The data suggest that the firms did not correctly anticipate how front-loaded the costs would be," added the report.
However, Professor Curtin said that to overcome the declines in government spending, the private sector must become the primary engine of economic growth.
During the survey, 50 per cent of firms reported worse-than-anticipated profits, the highest level recorded since 2001. Only 38 per cent of businesses expect improved profits during the year ahead.
Among firms, 26 per cent reported that their balance sheet had worsened and 60 per cent thought it was a bad time to make new investment, up from 42 per cent the previous quarter.
Firms viewed prospects for the national economy less favourably than any other time in the last eight years, with 62 per cent of them expecting it to worsen during the year ahead.
Businesses attributed the bleak outlook to job losses, depreciation of the Jamaican dollar, and the lack of government plans for meaningful improvement.
The consumer confidence index was 86.7 in the third-quarter survey, down from 99.7 in the second quarter, and barely above the all-time low of 82.7 set in 2003.
Although the fall-off occurred throughout the country, residents in the Kingston area held the least unfavourable economic assessments, while those in the tourist areas showed the largest declines.
The report indicated that the Government's provisions for an adequate safety net notwithstanding, economic growth must be generated by private initiatives based on the skills and productivity of all Jamaicans.
"The austerity plan must be balanced by some incentives to bolster consumer demand to end the economy's tailspin," it said.
Nearly half of all consumers surveyed judged economic conditions as worsened in the third quarter and expect it to continue on that trend in the year ahead.
Among respondents, 92 per cent said that jobs were scarce and hard to get.
Higher prices and the falling value of the Jamaican dollar resulted in a steep decline in expected living conditions, with 47 per cent assuming it will improve, down from 63 per cent during the corresponding period last year.
The proportion of households who received remittances was unchanged, although more recipients were younger and received such funds less frequently, but the amounts were somewhat larger than in 2012.
Curtin said that it could be that recipients were getting the same amounts in US dollars, but which translated into high sums because of depreciation.