Business, consumer confidence dips in third quarter
Business confidence dipped in the third quarter of 2019 as firms have second thoughts about their positive expectations for the economy over the next year.
Consumer confidence also fell for the first time in seven quarters, a decline attributed to their perception of business conditions now and their expectations for jobs in the future.
The business confidence index in the third quarter fell from 150.7 to 141.2, a nine per cent reduction, which researcher Don Anderson noted was “quite noticeable and dramatic”.
The consumer confidence index was down from 183.4 points in the second quarter of 2019 to 179.9 points in the third quarter.
The view from businesses is that current profits are better than they expected. However, businesses do not evince the same level of optimism about future profits and business conditions as the indices dropped from 143.9 to 129.8, said Anderson, managing director of Market Research Services.
Correspondingly, just over 50 per cent of businesses expressed the view that return on capital expenditure was as expected.
“While firms are still bullish on investment, fewer are now convinced that it is a good time to invest,” said Anderson in presenting the report of the survey, undertaken for the Jamaica Conference Board, the research arm of the Jamaica Chamber of Commerce, at the Courtyard by Marriott Hotel in New Kingston on Tuesday.
The proportion of firms that believe that it is a good time to invest fell from 67 per cent to 64 per cent during the review period, while there was a concomitant increase in the number of firms that feel that it is not a good time to invest, up by six percentage points from eight to 14.
The index for future economic conditions fell from 172 in the second quarter to 139 in the third quarter.
“This represents an overall decline of some 22 per cent in the number of firms which expected the economy to improve and a concomitant increase of some nine percentage points among those who expected the economy to worsen,” Anderson said.
On the positive side, the drivers of those competing views are the general feeling that the economy is heading in the right direction, a reduction in unemployment, and a restatement of confidence in government programmes, he said.
On the other hand, the instability of the foreign exchange rate has been cited as the most important factor in conditioning the thinking of businesses looking down the road.
“One will recall that the significant fluctuation in the value of the Jamaican dollar was seen in the first and second quarter as a major challenge to more long-term planning, which businesses clearly thrive on,” the researcher said.
“This result is therefore not really a surprise but rather a confirmation that businesses feel they are being destabilised by an uncertain exchange rate and the attendant challenges that this presents for more efficient, long-term planning,” Anderson added.
Over the last seven quarters, consumers have been noticeably confident about the direction of the economy and of their own fortunes, he said.
“We note with a sense of caution among consumers, however, that although there was a feeling that more jobs have become available, consumers did not show any marked inclination to spend, confirming some degree of scepticism regarding the longevity of this boom,” said Anderson.
He said that the decline in consumer confidence is more pronounced among people living outside of Kingston and other urban areas who have not seen the level of construction activity that is evident in the capital city.
Anderson said, “Consumers, on the whole, are confident about current jobs but are less so about future jobs coming on stream, and accordingly, their optimism about employment is lower, down from 127 points in the second quarter to 120 in the third quarter.”
He said that 12 per cent of consumers now feel that jobs are plentiful, “an extremely low figure but the highest ever. In general, therefore, consumers are wary about the availability of jobs”.
From very cautious behaviour in the second quarter, consumers appear flat in terms of spending patterns in the third quarter of 2019, with only vacation expenditure showing any noticeable improvement.
The number of consumers who said they receive remittances is at an all-time low, down from a peak of 38 per cent in 2016 to 33 per cent in the third quarter of 2019, Anderson said.