Oct 2016 Financial News

Two quarters post-election, business and consumer confidence remain high (Jamaica)

Oct 12, 2016

Jamaica has experienced two consecutive quarters of slight decline in business optimism since the traditional highs experienced before a general election, according to the latest surveys of business and consumer confidence revealed yesterday.

Nonetheless, optimism among businesses and consumers remained at its highest levels during the first three quarters of 2016 than any other quarter over the past 15 years.

The Jamaica Chamber of Commerce (JCC) Conference Board yesterday reported that business confidence dipped to an index of 139.2 for the third quarter of 2016 from the 141.6 reported a quarter earlier. Business confidence in both quarters remained lower than an index of 144.6 reported for the first quarter of 2016, but higher than the 123.0 reported in the 4th quarter of 2015.

“The more important news is that firms have maintained their confidence that the new government programmes will establish renewed economic growth,” managing director of Market Research Services, Don Anderson, stated in the JCC’s summary report.

“It is difficult for firms to judge in advance the eventual impacts of such a comprehensive change in economic policy, so it is not surprising that some of the Index components have recorded larger and smaller shifts than the overall Index,” he said, following a win by the Jamaica Labour Party in the general election on February 25.

According to Anderson, firms lowered the expected pace of economic growth in the year ahead, following a remarkable second quarter rebound of 1.6 per cent, which was higher than growth rates among trading partners such as the United States, United Kingdom, and Canada as well as the vast majority of all other countries.

RECORD LEVELS

He noted, however, that firms have not lessened their belief that a new economic era has begun.

“Perhaps the most telling commitment is the continued strength in the firms’ finances... has kept their plans to invest in new plant and equipment near all-time record levels. To be sure, old and new barriers to more robust growth must still be overcome, including crime, tax compliance, reduced remittances and pension flows due to Brexit as well as more effective credit arrangements so domestic firms can reduce imports and increase exports.

“Building on the existing upward momentum can ease and speed the accomplishment of what were once thought all but impossible changes,” Anderson continued.

For the third quarter, 49 per cent of firms expected an improved economy down from the all-time peak of 64 per cent in the second quarter. Only 16 per cent expected the economy to worsen in the year ahead, less than half of last year’s 36 per cent.

Among all firms in the third quarter survey, 65 per cent reported it was a good time to expand their productive capacity to take advantage of future opportunities, while 73 per cent of firms expected gains in the year ahead – the highest proportion ever recorded.

Consumer confidence also saw a slight decline from an index of 155.6 in the second quarter to 151.6 for the quarter under review.

According to Anderson, although slightly less favourable than at last quarter’s peak, consumers voiced very positive assessments of recent economic progress. He added that consumers’ judgements about the current state of the economy were more positive than in any prior survey during the past 15 years.

“The first two surges in consumer confidence in 2007 and 2012 quickly faded as the hoped-for economic gains did not materialise,” Anderson said. “The initial surge followed by more realistic expectations is not surprising, since consumers have long hoped for such an economic transformation. Importantly, there is no indication that consumers have lessened their confidence in the new economic policies.”

For the period under review, 34 per cent of consumers expected economic growth to improve, just below the record 37 per cent recorded in the two prior quarters, but twice the 17 per cent recorded in last year’s third quarter.

Anderson noted that the sustained levels of favourable economic prospects stand in sharp contrast to the election-induced temporary one-quarter peaks in 2007 and 2012.

Source:
BY KARENA BENNETT
bennettk@jamaicaobserver.com
Business reporter
Jamaica Observer
Wednesday October 12, 2016    

http://www.jamaicaobserver.com/business/Two-quarters-post-election--business-and-consumer-confidence-remain-high_76906