Spending plans on homes near record low

Consumer spending plans fall on expected dollar slide; businesses less optimistic

Wednesday, July 16, 2014

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CONSUMER plans to purchase homes or cars fell to near record lows in the second quarter of 2014.

They are hesistant due to expectations that the Jamaica dollar will hit $120 to US$1, said Don Anderson.

Increased caution in spending has been accompanied by greater reliance on remittance receipts by households, regardless of income grouping, according to the researcher, in his presentation of the Survey of Business and Consumer Confidence at the NCB Wellness Centre in Kingston yesterday.

"Consumers have become more cautious buyers as purchase plans for homes, vehicles, and vacations all fell to near record lows," said Anderson whose firm, Market Research Services Limited collates the infield data for the Jamaica Chamber of Commerce commissioned survey.

Home buying plans at seven per cent dipped from 10 per cent last quarter, and was barely above the all-time low of five per cent.

Vehicle purchase intentions were held by 10 per cent down from 15 per cent in the first quarter and equal to the all-time low.

Vacation intentions at 22 per cent declined from last quarter's 31 per cent and barely above the all-time low of 20 per cent recorded at the trough of the last recession, stated the statistics.

"While there appears to be an increase in the number of townhouses and apartments and so on," said Anderson, "with slight variations it seems to be the same people buying them.

It’s not a widening of the pool. So that will be reflected in the reduction of buying intentions. "More and more are being built but who are buying them. Again people are investing in houses but consumers are finding it more hard to buy houses to buy cars and take vacations."

Contrastingly, while acknowledging economic challenges, businesses continue to plan "record" investments. However, the data did not disclose the type or time frame for these investments.

The impact of present challenges and measured optimism resulted in a slight dip in the overall index of business and consumer confidence to 112.8 and 100.8, respectively, in the secondquarter 2014, compared to 117.8 and 104.7, respectively, in the prior three-month period.

Year on year, the indices remained flat. "The anecdotal information that I have is that people expect the dollar to move somewhere closer to $120 and perhaps $118," stated Anderson in response to a query. "Certainly consumers are likely to be constrained even further."

Some 37 per cent of the respondents indicate a reliance on remittances up from 36 a year earlier, he reasoned. But a worrying statistic relates to the increased numbers that do not save these remittances.

In 2010, about 33 per cent never saved their remittances compared with 59 per cent in the March 2014 quarter. Anderson expects the inability to save remittances to increase with depreciation. "You will see looking down the road, the remittance situation — that 59 per cent will probably move up even higher," he said.

"Because there will likely be even greater dependence on remittances. The fortunate thing is that the countries from which these remittances are derived are seeing better times than five years ago and therefore the remittance gate seems to be more open." The data was collected prior to the two-day visit by International Monetary Fund (IMF) boss Christine Lagarde. Market Research Services Ltd will shortly return to the field " and look at whether her visit affected confidence".

The Jamaican dollar lost over 12.9 per cent of its value against its US counterpart, moving from $99.30 to $112.62, since the IMF agreement was signed in May 2013. Hitherto the currency usually loses four to five per cent of its value annually.

Lagarde described the local currency depreciation as painful, but said it was necessary to achieve competitiveness and restore dignity.




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