Thu | Jul 9, 2020

Surge in business, consumer confidence

Published:Wednesday | January 21, 2015 | 12:00 AM

McPherse Thompson, Assistant Editor - Business

Business and consumer confidence improved during the December quarter, one of the few occasions in which the indices moved up at the same time, and the first time that a majority of firms have expressed a willingness to invest.

Optimism among Jamaican firms posted a quarterly gain of 9.5 per cent and recorded an annual gain of 25.1 per cent as the Business Confidence Index rose to 122.9, up from 112.1 in the third quarter of 2014 and well above the 98.2 recorded in the 2013 fourth quarter.

Consumer confidence rose during the quarter to 110, the highest level since the closing quarter of 2012 as they became more convinced that the economy and job prospects will begin to improve in 2015, the Jamaica Conference Board reported.

"Consumers are a little more upbeat. Nobody is saying the country is out of its serious challenge, it's not that people are feeling that the economy is strong," said managing director of Market Research Services, Don Anderson, who presented the findings of the surveys on Tuesday.

According to the survey report, businesses have expressed increased confidence that the Government's economic policies will serve to improve the economy as well as their firms.

The surge in optimism has occurred despite the fact that firms have so far reported even weaker recent profits than they anticipated three months before the surveys were conducted between October and December 2014.

"This reflects a strong and growing sense that the Government's policies are on the right course," the report said.

"While no comprehensive change in economic policies will be favoured in every detail by every firm, the data clearly indicate that most firms believe that the country is at the forefront of a new economic era," it said.

"Nonetheless, firms would also point out that such optimistic expectations have repeatedly failed in the past to turn the initial promise into actual economic gains," the report added, warning that "the Government's steadfast commitment is now essential to reduce any lingering uncertainty about its implementation."

Despite disappointing recent profits, 62 per cent reported that the financial health of their firms improved, up from 45 per cent the prior quarter.

The proportion which expected the economy to improve rose to 44 per cent from 29 per cent a year earlier, with nearly 50 per cent saying their optimism was linked to the expected positive impact from the government and International Monetary Fund policies.

Good Time To Expand

The report pointed out that "there is nothing that indicates confidence in a firm's financial future than their willingness to invest more money in new plant and equipment in anticipation on a booming economy," noting that an all-time high record number, 65 per cent, said it was a good time to expand their productive capacity.

Few consumers reported any meaningful progress on jobs, but expect that in 2015 a better economy will provide more employment.

Gains in the fourth quarter index were recorded by residents of Kingston and tourist areas, with confidence falling in the rest of the country due to the impact of drought on agriculture.

Depreciation of the Jamaican dollar, stagnant salaries, scarce job opportunities, higher taxes and rising prices continued to be the common complaints of consumers, the report said.

Although consumers were still quite dissatisfied with the economy, their assessments improved to the highest level in the past two years, with just seven per cent saying the economy was in good shape and 35 per cent believing it has worsened, down from 42 per cent in the previous quarter, and 45 per cent a year before.

In the fourth quarter survey, 33 per cent said they expected an income increase, while 19 per cent expected a decline in household income.

Consumer purchase plans remained unchanged with home-buying plans expressed by just seven per cent, vehicle purchase plans by 13 per cent and vacation intention expressed by 27 per cent.

The surveys of business and consumer confidence is a collaboration of the Jamaica Conference Board, the research arm of the Jamaica Chamber of Commerce, and the Survey Research Center of the University of Michigan.