By Lavern Clarke, Staff Reporter
BUSINESS CONFIDENCE in the economy has slipped marginally in the fourth quarter of 2002, with expectations that things will worsen for Jamaica over the coming year.
But in direct contrast to what companies expect, consumer confidence in Government and its policies was the highest it has ever been since the survey began in 2001, and their expectations are that the economy will improve this year, and their incomes along with it.
And, as businesses look to larger profits an indication that cost containment and efficiency drives will continue consumers are looking to spend even more this year on expectations of gains in incomes.
Their optimism flowed from "a favourable assessment of Government policies", whereas almost nine in ten businesses cited crime, and concerns about economic policy as the harbingers of bad times for the country.
The fourth quarter survey of consumer confidence show that 41 per cent of Jamaicans anticipate "more frequent income increases" in 2003, and that 58 per cent expect to improve their standard of living. Alongside that, consumers also indicated that they plan to buy more homes and cars, and take more vacations, based on their optimism that more jobs will emerge.
One in four consumers, or 25 per cent, anticipate better prospects for the country, notwithstanding that eight in ten people see little hope of jobs - whereas 38 per cent of businesses expect the economy to decline, up from 22 per cent in the preceding quarter.
The tourism areas were found to be the most optimistic.
"Business and consumer confidence has moved in opposite directions," said Professor Richard Curtin, at the release of the fourth quarter indices on Tuesday in a morning meeting at the Terra Nova. He said, however, that the movement of the data over the life of the survey is indicating that the views are moving closer to convergence. Anthony Chang, director of the Jamaica Conference Board and chair of the Terra Nova meeting, said for the current results, businesses are advised to base their planning on the IBC and to use the ICC "cautiously." The Board is the research arm of the Jamaica Chamber of Commerce.
The consumer index is used as a measure of how well retail sales will perform in the months ahead, but Curtin admitted to not being sure about what informs consumer decisions in Jamaica.
The survey, conducted by Don Anderson's Market Research Services, was done between November 11-19, and the results compiled by Professor Curtin in December, ahead of Finance Minister Dr. Omar Davies' announcement of increased taxes to help close the gap in the revised Budget, and his confession to Parliament that Government's macro targets for the deficit and the debt were off track and likely to continue heading in the wrong direction.
The index of business confidence (IBC) weighed in at 115.0 in the fourth quarter, two
per cent lower than its all-time peak of 117.7 recorded in the preceding quarter; while the Index of Consumer Confidence (ICC) rose to 121.2, a significant 15 per cent hike over the prior quarter, and a nine per cent improvement on year ago levels.
In announcing the results of the survey, Curtin, who heads up the Department of Consumer Surveys at the University of Michigan, was careful to note that the data was generated prior to the update on the economy.
Chang says he expects the next survey to show considerable shifts in confidence. The professor said the divergent views appear to flow from several factors including consumer expectations of improved economic activity in the post election period - in light of the positive spin that Government had put on the economy's performance - while businesses were more sensitive to interest and exchange rate shifts.
The opinions of the vibrant informal business sector, he adds, appear to have been captured within the consumer index, thereby influencing the positive outcome in that category.
Despite their pessimistic outlook for the economy, Jamaican firms still think the conditions for investment are favourable, and expect that they will continue to improve their profit levels in the coming year - an indication that they have more confidence in themselves to manage their operations than in the Government to run the economy.
So far, Curtin has done no real analysis yet on how accurately the indices mimic objective economic data, but hopes to address that area over this year. He told Wednesday Business that he is still awaiting the release of Government data to run the analysis, but anticipates that when the analysis is done, the surveys will mimic economic performance as happens in the over 30 other countries that employs similar surveys.
