May 2017 Financial News

Growth flatlines, consumer confidence down. Business, consumer confidence decline for first quarter (Jamaica)

May 31, 2017

Economic confidence among Jamaican firms and consumers have dipped for the first quarter of 2017, sending signals that the high levels of confidence experienced for the year 2016 might be coming to a close. But pollster Don Anderson says the country should wait for the results of the current April to June quarter to see if there is continuous decline before it can be said that the high confidence pattern is beginning to take a downward trend.

Nonetheless Anderson, during his presentation of the first quarter 2017 Survey of Business and Consumer Confidence, noted that there are signs that consumers are beginning to lose patience on election promises as consumer confidence declined from 151.6 to 138.7 for the first quarter of 2017.

It's the lowest level that the country has seen over the past year, although it remained more favourable than the index level reached over the last 10 years with the exception of a single survey.

“It suggests to me that the consumers are perhaps beginning to lose patience with the pace at which their expectations are being realised. It's a bold statement to make in the absence of the second-quarter data, which will obviously tell us whether this is true or not,” Anderson said.

His statement was supported by declines in all areas of consumer indexes. Consumer outlook for the economy for the year ahead weakened, down to 30 per cent from 38 per cent of consumers expecting an improved economy. Job gains also weakened with 26 per cent of consumers expecting an increase in job availability, down from the 42 per cent recorded in the first quarter of 2016.

“Unlike previous quarters, we are now seeing consumer confidence slightly contracting. Their spending plans have contracted and intentions to go on vacation have contracted as well. Income expectations have also softened.

“In the previous quarter consumers were saying jobs are going to come on stream, we are going to get some of it, we are going to participate in the growth of the economy, benefits will accrue to us. What they are now saying is that we are not so sure, so that's the concern that was certainly expressed in the first quarter,” he said.

Anderson noted that home buying plans of consumers remained unchanged in the first quarter, while motor vehicle purchase plans declined. Vehicle buying intentions fell to 15 per cent from last quarter's 20 per cent and 22 per cent in the prior quarter, while vacation intentions plunged to 31 per cent from 43 per cent in prior two quarters.

He warned that while the small first-quarter setback does not indicate a shift towards pessimism, consumer confidence will ultimately fade unless reinforced by a growing experience of economic gains along with a sense of equal sharing of the burdens and subsequent benefits of the ongoing transformation of the economy.

BUSINESS CONFIDENCE DIPS

Business confidence for the first quarter of 2017 stood at 139.3, slightly below the last quarter's 142.0 and nearly identical to the third quarter of 2016 reading of 139.2. The business confidence index has averaged 141.4, with minor month-to-month variations over the past five years' quarters, marking the most stable period as well as the highest level of business confidence recorded since the survey began in 2001.

While firms expressed a willingness to invest in new plant and equipment, there was a slight decline in optimism quarter over quarter which Anderson said was too small to be attributed to any specific cause, as neither revenues, profits, nor the pace of economic growth signalled the decline.

“Perhaps it was the widespread expectation of rising business taxes in the year ahead,” he said.

When asked whether firms expected an increase or decrease in business taxes for the next fiscal year, 60 per cent of all firms expected a tax increase compared with eight per cent that anticipated a decline.

In line with the tax increase, firms also expect that the revenues collected will be used to improve the economy.

According to Anderson, the proportion of firms that expected an improved economy was 56 per cent in the first quarter survey, between last quarter's 53 per cent and the first quarter of 2016 62 per cent. He added that firms were somewhat less likely to anticipate a worsening economy in the year ahead, 16 per cent down from the 22 per cent reported in the last quarter.

Expected changes in firms' finances and profitability also declined for the first quarter but remained at favourablyhigh levels.

Source:
BY KARENA BENNETT
bennettk@jamaicaobserver.com
Business reporter
Jamaica Observer
Wednesday May 31, 2017

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