Keith Collister, Contributor
CURTIN
CONSUMER CONFIDENCE fell to its lowest level in more than a year, according to the latest Consumer and Business Confidence Index numbers for the fourth quarter of 2005.
But following an unusually large decline in the third quarter of over 20 per cent from 122.8 to 97.2, business confidence recovered somewhat to an index level of 106.5.The Jamaica Chamber of Commerce's Conference board yesterday released the data at a press conference held at the Terra Nova Hotel in Kingston.
American professor Richard Curtin who prepared the data, said the recovery in business confidence was due to much more favourable expectations for economic growth by firms for the year ahead. Nevertheless, most firms still appear to believe it will take more time to recover from last year's shocks of hurricane, drought, floods, and soaring energy prices. Moreover, firms remain concerned about insufficient domestic demand, ineffective government policies, and the impact of crime and violence.
REBOUND EXPECTED
Twice the number of firms in the prior quarter, or 26 per cent of all firms, expected the economy to improve in the year ahead. However, this was still significantly below the 34 per cent who expected the economy to improve at the start of 2005. This mainly reflected renewed strength in the mining, tourism and construction industries.
Despite better-than-expected profits, firms' investment plans were less buoyant than at any time in the past year, with just 31 per cent thinking it was a good time to invest, compared with 42 per cent at the start of 2005. This appeared to reflect the concerns of firms about taxes, economic policies, interest rates and high construction costs.
Overall, Professor Curtin said that while firms were not pessimistic, they were not particularly optimistic. He suggested, however, that Jamaicans not lose heart, citing the example of New York, where a huge reduction in crime and violence over the past decade has had a very sharp, positive economic impact on that city.
CONSUMERS HIT
In percentage terms, the non-seasonally-adjusted index of consumer confidence had fallen by 4.6 per cent to 103.9 in the fourth quarter, down from 108.9 in the third quarter, and was still sharply below the two-year high reached at the end of the fourth quarter of 2004 of 118.6, he said.
There was a substantial geographical variation across the country however, with small gains in confidence reported among residents of Kingston and tourist areas, offset by substantial declines among residents in other areas of the country. The confidence gains in Kingston and tourist areas mainly reflected their high expectation of income gains, expectations which were not shared in other areas of the country, accounting for their more pessimistic outlook.
'JOBS IN SHORT SUPPLY'
Consumers judged the current state of the Jamaican economy unfavourably, while the largest proportion of consumers in two years thought jobs were in short supply. Only one per cent of consumers believed jobs were plentiful, as opposed to 90 per cent of consumers who believed they were in short supply. Consumers held pessimistic expectations for the year ahead, expecting both slow economic growth and that jobs would continue to be hard to find.
LARGER INCOME GAINS EXPECTED
Consumers held positive expectations for income increases in the year ahead, with 45 per cent of consumers anticipating higher incomes, up from 34 per cent at the start of 2005, possibly reflecting anticipated increases in wages or remittances. Consumers reported that their remittances had increasingly been used to pay utility bills. Despite higher expected wages, consumers expressed the lowest level of vacation spending plans since 2001, although their purchase plans for housing and vehicles declined more marginally.
Sponsored by U.S. AID for most of the past five years, Conference Board Chairman Desmond Blades signed an agreement for the expenses to be paid by new sponsor NCB Capital Markets, thereby guaranteeing their future for the next two years.
