Dec 2005 Financial News

$35.1-b cash will buy less than '04 X-Mas

Dec 28, 2005

Commercial banks, companies, and individuals in Jamaica will be carrying around $35.1 billion in cash in their vaults, tills, and wallets this Christmas, lower in real terms than they did last year thus providing for lower spending power.

But the Bank of Jamaica suggested on Friday that the anaemic growth in nominal notes and coins this Yuletide season, does not necessarily mean that Jamaicans did not go on a spending splurge, because they can also use their credit and debit cards and cheques to buy goods and services.

The value of notes and coins in circulation on Friday was 5.1 per cent above the amount that was available on the same date last year, but with inflation running around 13 per cent between both periods, the cash this season will buy less than it did last year.

The BOJ however said that plastics and cheques were increasingly becoming a preferred form of payment, so the relatively modest increase in cash did not necessarily mean that more expenditure would not take place this Christmas season.

"The lower growth in currency issue in 2005 continues to be influenced by the impact of increased use of alternative means of payments, that is, point of sale (POS) facilities (especially the use of credit cards) and cheques," said the central bank.

It still remains unclear how much impact plastics will have on spending this Christmas. Credit card receivable at commercial banks grew by 15.9 per cent to $8.3 billion during the 12 months to September 30, 2005 - making it still far less popular than cash as a payment option.

Importantly, the five per cent increase in cash this season is way below the 15.1 per cent growth recorded in 2004, and the 12 per cent in 2003.
The cash in circulation at Christmastime is around $7 billion more than the normal level.

The BOJ expects the entire system to return to the pre-Christmas cash demand of $28.2 billion by the end of January.
Significantly, though the peak demand for cash is the few days following Christmas day - December 25.

"The Bank of Jamaica expects that additional currency will be demanded immediately following the long holiday weekend, as the banking system replenishes its holdings of currency to restock its automated banking machines (ABMs) with clean notes," said the BOJ. "However, the volume of currency in circulation is expected to start falling by Thursday, 29th December."

BOJ explained that the net increase in currency over the period December 1 to 22, 2005, was $6.9 billion or 24.7 per cent.

The Jamaican Observer
Sunday, December 25, 2005
http://www.jamaicaobserver.com/magazines/Business/html/20051224T160000-0500_95298_OBS_______B_CASH_WILL_BUY_LESS_THAN_____X_MAS_.asp