Jul 2010 Financial News

Confidence rebounds

Jul 14, 2010

Confidence in the Jamaican economy is on the mend after a disastrous outlook in the first quarter of the year as measured by the Jamaica Conference Board's business and consumer confidence indices survey.

Consumer and business confidence rebounded in the second quarter of the year erasing the entire 11.3 points decline recorded in the first three months of the year, with consumers and businesses expressing a more optimistic outlook of the future.

Confidence rose 11.3 points up from the first quarter to 102.1, the same level it was for the final quarter of 2009.

"Both consumers and businesses expressed greater confidence in the future of the economy in the latest survey," said Professor Richard Curtin, head of the Survey Research Centre at the University of Michigan and Jamaica Conference Board survey analyst, as he presented the findings in Kingston Tuesday.

"It wasn't just a nudge, it was a significant gain although they started out at a record low level; so in absolute terms, confidence is still quite low, but it was a very good start to restore confidence," he said.

The survey had shown that for the previous three months which opened this year, Jamaican consumers were even more depressed about the general economic outlook than they had been in previous periods, with the survey recording the second lowest consumer confidence level for the past decade.

Business confidence also remained at low ebb in the first quarter, registering a slight decline among Jamaican firms over the previous three months, although entrepreneurs were hopeful of the outcome of that the International Monetary Fund (IMF)-imposed macroeconomic programme.

For the second three months this year, Curtin said, business outlook improved more than consumer confidence. The index of business confidence was 114 in the second quarter, up from 99.0 in the first three months of the year, and was the highest level recorded by the survey since mid-2008.

"In fact, more firms felt the economy would improve in the year ahead than we ever reported before," he said of the 100 firms polled.

He reported that 52 per cent of the firms expected the economy to improve during the year ahead, up from just 34 per cent that displayed such optimism in the first quarter of the year. In fact, the lead researcher said, this percentage was the largest proportion ever recorded by the survey as being hopeful of a better economy in the year ahead.

Green shoots

"This is a leap up and it indicates that firms have very optimistic expectations for the outcome of economic policies in the future," Curtin noted.

Positive investments plans were at 41 per cent, and although this was barely above the 39 per cent recorded in the previous quarter, it was the highest level seen in a year and a half.

Meanwhile, Curtin said that 42 per cent of the surveyed firms expected higher profit margins next year. Again, this is up from the 34 per cent in the previous quarter. A significant 49 per cent expected improvement in their balance sheet.

"They still talked about their dismal profit picture in the past year and their investment plans have improved, they expect profit to improve but improve rather slowly in the year ahead," Curtin added.

The second quarter data showed that just 13 per cent of all firms reported that last year's profits were better than they had anticipated. This was in contrast to more than three times as many firms reporting that their profits were less than they had expected.

"They underestimated how much the global recession would have affected Jamaica's businesses, the length of it and the depth," Curtin said.

On consumer confidence, Curtin said the availability of jobs remained the bleakest ever recorded, that indicator remaining in the doldrums for the third consecutive quarter. More than nine in 10 consumers reported that jobs were scarce and hard to get.

Consumers' income prospects have improved from the previous three months when it was the bleakest outlook ever recorded, but Curtin pointed out that income expectations at this time are still the worst in seven years.


Source:
dionne.rose@gleanerjm.com
Jamaica Gleaner
Wednesday July 14, 2010

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