Ambivalence growing about business conditions in Jamaica reveals BOJ survey

Ambivalence growing about business conditions in Jamaica reveals BOJ survey

BY DURRANT PATE
Observer Business Writer

Sunday, September 27, 2020

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More local businesses are ambivalent about the present and future business conditions in Jamaica.

This is based on the Bank of Jamaica's (BOJ's) latest Survey of Businesses' Inflation Expectations for July 2020, which was released recently. The survey, which seeks to ascertain the expectations of businesses about variables, which are likely to have an impact on inflation in the near term, showed that slightly more businesses are of the view that conditions are worse off in this survey than the previous one in March 2020.

In the July 2020 survey, the Present Business Conditions Index decreased to 37.0 relative to 49.2 recorded in the previous March survey. However, the Future Business Conditions Index remained broadly in line, as the index fell marginally to 142.7 in July relative to 142.8 in the previous survey.

The decline in the Present Business Conditions Index reflected an increase in the number of respondents of the view that conditions are “worse”. The out-turn for the Future Business Conditions Index mainly reflected a decline in the proportion of respondents who believe that conditions will be “better”.

The survey is administered by the Statistical Institute of Jamaica (STATIN) on behalf of the BOJ and captures the perception of chief executive officers, managing directors and financial controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages/salaries. It was conducted from July 6- August 10 and had 316 respondents.

OPERATING EXPENSES TO CLIMB

In terms of operating expenses, businesses surveyed indicated that they expected operating expenses to climb over the next 12 months. The data showed that the largest increase in production costs will emanate from fuel and transport, wages and salary, and raw materials.

The cost of utilities is anticipated to be the least likely to increase. In terms of exchange rate expectation, respondents anticipated depreciation over all time horizons, three month, six month and 12 month.

In the July 2020 survey, the exchange rate was anticipated to depreciate by 1.6 per cent for the three-month horizon, 2.6 per cent for the six-month and 3.0 per cent for the 12- month horizons. According to the survey, this represents a much faster pace of depreciation for all three time horizons relative to the expected appreciation of 0.5 per cent for the three-month horizon and a depreciation of 0.1 per cent for the six-month and 0.4 per cent for the 12- month time horizons.


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