Record High

Jamaica's Consumer confidence hits 17-year high

Business reporter

Wednesday, October 10, 2018

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Businesses and consumers were again on opposite sides of the fence on current conditions and future expectations of the economy, according to the third-quarter 2018 indices results from the Jamaica Chamber of Commerce (JCC).

Consumer confidence hit a 17-year high over the last three months at 172.6 index points, compared to 159.1 index points over the period April to June 2018. In presenting the findings, pollster Don Anderson noted that the positive job outlook was driven by consumer's observations of people getting jobs, reports of jobs being created, and their confidence in the Government's efforts and initiatives.

“Optimism for job prospects is largely in the tourism industry and in Kingston, where a lot of construction activities are happening,” Anderson said in the report summary presented at the JCC Secretariat, Richmond Park Great House, yesterday.

Consumers' assessment of current economic conditions grew by approximately 36 index points since the first quarter of 2018, while expectations for the future also grew by 9 points. Ten per cent – up from 7 per cent in the second quarter – shared the view that jobs are plentiful; while 41 per cent up from 37 per cent expected the job situation to improve in 12 months.

Despite stronger consumer confidence, business confidence remained flat in the third quarter at approximately 140 points, after dipping to 136.5 points in the first quarter of 2018.

Notably, for the first time in several quarters, business owners cited the devaluation of the Jamaican dollar as the main factor adversely affecting investment plans.

Previously, crime and violence was named as the number one problem facing the economy.

“Crime is still a big deterrent; it's just that the devaluation of the dollar supersedes it for this particular quarter. If we look at the responses, crime is probably at the same level it was in the first and second quarter, but the difference is that this negative dynamism, the rapidity in devaluation is what has led businesses to say it is a factor for them to consider,” Anderson reasoned.

The survey period for the latest index lasted from 26 June to 25 September 2018, during which the exchange rate climbed to an average of $137 to US$1. However, at the start of the year the exchange rate averaged $125 to US$1.

Earlier this year, the Bank of Jamaica opened its foreign exchange auction – B-FXITT – to buy US dollars for the first time, after only selling to dealers since July last year. At the same time BOJ, in accordance with the International Monetary Fund agreement, had moved from a foreign exchange rate target to inflation targeting, which was running at 2.9 per cent from a prescribed rate of 4 to 6 per cent.

“So from the IMF target, they had a buffer and they were going to stabilise the dollar. What you're seeing on one hand is that for businesses, the dollar moved too quickly to keep them comfortable and that shattered the confidence, because the objective of having people trying to get people to save in the Jamaican dollar and not US dollar had moved,” president of the JCC Larry Watson said.

“So at that particular time when Don was doing the survey, it moved the focus of the business confidence to the exchange rate. However, the BOJ and the MOF has been very vocal in how they are managing it. They placed over US$100 million into the market, plus a flash auction of US$40 million and now they are consistently selling; they have stopped buying. The dollar on Monday was $133.99. It will be interesting again when Don goes in the market to see the effect that the action has been taking.”

According to the third-quarter 2018 report, the firm's willingness to invest in new plant and equipment dipped to 136 points from 140 points set in the first quarter, while business outlook on the economy dipped – with 48 per cent compared to 64 per cent in quarter two reporting that they expect the economy to improve over the next 12 months.

When asked to assess their firm's financial prospects, 76 per cent expect gains in the year ahead and 67 per cent expected improvements in the profitability of their firms. Nearly six out of every 10 firms or 58 per cent interviewed reported that profits were as expected, while the proportion that reported a disappointing profit experience dipped to 25 per cent down from 28 per cent in the second quarter.

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