Keith Collister, Contributor 
KFC's Mark Myers: Consumers' purchasing power affected. – Winston Sill Photo, PSOJ's Beverly Lopez: Consensus critical to economic future. – File, Richard Curtin: Negative outlook for the economy. – Junior Dowie Photo
THERE APPEARS to be an emerging consensus in the business community that Jamaica is in an "economic malaise".
Inflation seems not likely to come down in line with the Government forecasts, and the increase in GCT by 1.5 per cent beginning to adversely impact the economy by reducing overall spending power and disposable income.
As a consequence, leaders of the Jamaican business community appear to be calling for immediate measures to address inflation, crime and government spending, to take Jamaica out of its current negative economic situation.
Last week's release of the third quarter business and consumer confidence indices of the Jamaica Chamber of Commerce (JCC) provides a good backdrop for this call as it revealed a very sharp fall in business confidence of over 20 per cent from the previous quarter to its lowest level in four years.
NEGATIVE OUTLOOK
Whilst consumer confidence was essentially flat, in his analysis of Jamaica's confidence figures, leading international economist and JCC consultant Richard Curtin stated that he believed that the negative outlook for the economy suggested by the business confidence numbers (which had been prepared approximately one month later than the consumer confidence numbers in mid September) were more reflective of the current situation of the Jamaican economy, and that he expected consumer confidence to fall in the next survey.
In his experience, which includes doing surveys in 46 countries, business confidence is more reflective of the future path of the economy than consumer confidence (a more lagging or coincident indicator) and he therefore projects poor growth for the fourth quarter.
VARIED FACTORS
According to the survey, the reasons for this loss of business confidence included crime and violence, inflation, rising fuel costs and loss of confidence in government policy.
JCC President Noel DaCosta shares Professor Curtin's view.
"The JCC is very concerned about the current economic malaise. There appears to be clear evidence that the business community is currently thinking about other things than making business grow, for example, crime, the exchange rate, the effect of natural disasters on inflation, which is not good for growth going forward."
Anecdotal evidence from a number of key executives of Jamaica's largest businesses appears to provide support for the JCC's view that the Jamaican economy has been suffering for the last few months and that all industries are feeling the effects of the downturn.
Superplus's Wayne Chen advises that over the past few months his sales had been leveling off, whilst over the last two weeks there had been a significant decline in the spending of his middle and working class customers which he is at a loss to explain as it is without precedent.
DECLINE IN SPENDING
He says this recent fall in sales preceded the recent poor weather conditions, and is an across the board fall in sales at all his locations right across the Island.
This is despite an increasing customer base, suggesting that the average spend per customer is going down.
Looking only at his 'mature' store sales, in U.S. dollar terms they have actually declined slightly compared to last year. In his opinion, there is strong anecdotal evidence to suggest that consumers are being much more selective when going to the grocery store.
He believes the most likely explanation for this "economic malaise" is the constant hike in fuel prices, which appears to finally be taking its toll on the consumer, and the recent slippage in the dollar.
Mark Myers, chief executive officer of leading restaurant chain KFC, agrees that the purchasing power of his customers has been badly affected.
"Our customers are having a real difficulty maintaining the standard of living they have become accustomed to. We have spoken directly with them and they have stated that with the
increases in prices they are not able to maintain their usual consumption patterns."
Digicel's CEO David Hall also supports this view, stating that he has witnessed " a real tightening of the economy since July for the first time in a long time. Every economy is cyclical and Jamaica is no different, however this current rise in petrol prices and inflation has definitely had a significant impact on the general population. We've been getting feedback from our staff on the negative effects that these economic indicators are having on their discretionary spending."
Grace Kennedy's Don Wehby agrees, "Food and hardware, in fact retail as a whole, has been extremely sluggish." Mr. Wehby says that Grace Kennedy is very concerned about this economic sluggishness as it is clear that in this type of environment business will not be able to fully pass through the increase in its costs to its customers. To combat the effect of this "cost push" inflation, Grace is carefully managing its costs and emphasizing cost containment measures.
Mr. Wehby was also concerned over the prospects for a continued rise in inflation, which at 2.6 per cent in September was significantly greater than expected, particularly within the context of the effect of the recent floods on the agricultural sector and the continued uncertainty over oil prices.
On the tax front, he was also concerned about the underperformance of GCT collections relative to target despite much higher than programmed inflation of almost 20 per cent year on year. In his view, this poor tax performance suggests that consumption is weak, raising the possibility that growth in the economy may be significantly slower than currently projected.
RISING CRIME
David Hall believes a key factor contributing to the current negative outlook is increased crime and violence. Both him and Mr. Wehby agree that the current crime situation plays a key role in the poor business outlook, and has affected business confidence very negatively. In David Hall's view, a strong economy requires social stability and perceived effective governance.
WEAK TOURISM
Both executives are also concerned about the state of the tourism industry. Industry sources indicate that Tourism figures are way down in the month of September and lower than normal for this time of year. Mr. Hall believes memories of hurricane Ivan from last year at this time and recent hurricanes (Denis and Emily) have all had an adverse impact on tourist numbers. The slow-down in the US economy plus the impact of the US hurricanes (Rita and Katrina) is also likely to have a detrimental impact on the Jamaican economy as Americans cut back on their travel budgets, as well as possibly affecting remittances back to Jamaica.
Commenting on the latest September release of the quarterly PSOJ News which was devoted mainly to the issue of the "Partnership for Progress", PSOJ Head Beverly Lopez emphasizes "A key requirement for the PFP is the partner's continued buy -in to a process that will require long term vision?. we hope to build a partnership that can last indefinitely, leading to longer periods than the initial agreements, eventually creating a consensus spanning political administrations." Her belief is that achieving this economic consensus is critical to Jamaica's long-term economic future.
The failure to sign the long awaited agreement in August, thus institutionalising a positive policy consensus on the economy and crime, appears to have largely coincided with the recent economic downturn and the weakness in the dollar. Both the PSOJ and its sister organisation the JCC intend to renew their lobbying for its signing as a small first step on a long road to economic prosperity for Jamaica and Jamaicans. In my opinion, this would be a critical step in helping to restore business confidence in the Government's economic policy.
