Businesses more optimistic about the year ahead, says central bank report
BUSINESSES are more optimistic that conditions will improve over the next year.
“In the recent survey, there was an improvement in both the perception of present and future business conditions among respondents relative to the previous survey,” said the latest Bank of Jamaica (BOJ) Survey of Business Inflation Expectations.
Companies highlighted rising utility costs as a major threat.
Perceptions of future business conditions rose by roughly one-quarter from year-earlier levels to 129.9 points in June. The index was also higher than in May, when the perception score was 117.
The report asked respondents whether they believed “that in a year from now business conditions [would] get better or get worse”.
Respondents to the survey also thought that present business conditions were twice as favourable as a year earlier at 121 points. The index was 102 points in May.
These figures match with one line item in the latest Business and Consumer Index published by the Jamaica Chamber of Commerce.
That survey indicates that firms were willing to increase investments in their own businesses during the year.
It was the third consecutive quarter of growth in that category.
The BOJ report, however, conflicts with the overall decline in Business and Consumer Confidence at 112.8 and 100.8 points in the second quarter 2014, compared to 117.8 and 104.7, respectively, in the prior three-month period.
A major concern of respondents included the depreciation of the local currency against the US dollar.
The Jamaican dollar lost over 13 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.
The currency historically loses four to five per cent of its value annually.
“Respondents continued to indicate that they expect the largest increase in production costs over the next 12 months to emanate from higher costs for utilities,” stated the BOJ report. “Stock replacement was expected to be the second largest contributor to higher production costs over the next 12 months. The cost of fuel/transport and raw materials were also expected to contribute significantly to higher production costs for the year ahead.”
Wages and salaries remained the input cost least expected to increase over the next 12 months.
Respondents also expect single-digit inflation of roughly 9.8 per cent over the 12 months to June 2015. This is in line with Government’s aim of single-digit inflation. It is also lower than the 10.4 per cent annual inflation businesses predicted in May.