By Dennise Williams, Staff reporterCAUTIOUS OPTIMISM was the watchword for both business entities and consumers in the fourth quarter of 2003 according to the confidence indices released by the Jamaica Conference Board (JCB).
Both consumers and business entities believed that the economy could grow in the coming year but each had particular concerns that could derail the extent to which the expected growth benefits them. Professor Richard Curtin, the head of the survey research centre at the University of Michigan, presented the results at the Terra Nova Hotel in St. Andrew, yesterday.
Both consumers and businesses believed that the economy could grow in the coming year but each had particular concerns that could derail the extent to which the expected growth benefits them.
"There is a polarisation of business opinion," Professor Curtin stated. "More firms expect the economy to do better and more firms expect the economy to do worse."
The confidence of Jamaican firms increased significantly during 2003, the report stated. These gains were offset by somewhat reduced estimates of economic growth during the year ahead, and as a consequence, a slight decline in the willingness of firms to invest in the expansion.
DOMESTIC DEMAND
Prospects for domestic demand remained constrained by the increase in bus fares (and utilities), the lagged impact of devaluation, continued concerns about the fiscal policies of the government and the lack of new job creation."
But it is the prospect of economic growth without the corresponding job creation that worries Jamaican consumers the most. According to the consumers that were surveyed, nine out of ten believed that jobs were scarce and hard to get.
"The Jamaican consumer is asking where are the jobs," Professor Curtin said. In fact, this jobless growth phenomenon also is taking place elsewhere in the world including the United States."
And a part of this 'jobless growth' that the Jamaican economy is facing manifests itself in another way for firms.
PROFITS
"Jamaican business firms say their profits improved in the fourth quarter due to productivity gains," Professor Curtin said. "Because workers are more productive, there is less of a need to hire additional workers."
The corollary affect of this is that despite the growth in profits, there is a cautious approach in the firms' investment plans.
The survey said consumers are cautiously optimistic in their spending plans. It is also said
"The consumer expressed slightly higher
spending plans than the previous quarter because they see the economy as
growing," professor Curtin said.
For the coming year business profits will come from exporting, cutting costs, creating more products and a stable exchange rate. However, the survey revealed that the manufacturing sector is worried about the amount of disposable income available to Jamaicans to spend on their products while the tourism industry is concerned about the possibility of terrorist attacks crippling their sector.
Both businesses and consumers alike, according to the survey, are very concerned about what the Government plans to do about the budget.
"A sense among all is that the fiscal problem has to be solved," professor Curtin said. "This will occur by either reducing spending or raising taxes."
Another concern is devaluation. For exporters, the devalued dollar makes their products more competitive on the world markets, but for non-export businesses, the survey revealed that, "devaluation is linked with the fiscal deficit. Businesses feel that Government will move in the right direction and take pressure off the Jamaican dollar. But when exactly that will occur is what is worrying Jamaican businesses."
See tables for results of the survey.
BUSINESS CONFIDENCE
The current rate of return on investments was reported to have met or exceeded the original expectations of 65 percent of all Jamaican firms in the fourth quarter.
29 per cent in the fourth quarter survey reported that profits were lower than originally anticipated.
Firms in the fourth quarter survey reported the best returns on investment since late 2002.
More firms than anytime since late 2002 anticipated a higher rate of economic growth during the year ahead in the fourth quarter 2003 survey.
Price increases where expected less frequently in the fourth quarter survey than on year earlier.
29 per cent of Jamaican firms thought that it was a good time to invest in the expansion of their businesses in the fourth quarter. -Larger profits were expected by 48 percent of all firms in the fourth quarter.
CONSUMER CONFIDENCE
Income increases were expected by 35 per cent of all Jamaicans in the fourth quarter.
One in five Jamaicans expected the job situation to improve during 2004.
Residents in the tourist areas were the least optimistic about the economy, as they expected fewer gains in business conditions and somewhat smaller income increases.
Vacation plans were reported by 28 per cent of all Jamaicans, up from 23 per cent in the third quarter.
Home buying plans were reported by nine per cent of all Jamaicans up from eight per cent in the third quarter.
