THE RESULTS of the latest business and consumer confidence surveys show a noticeable divergence between businesses and consumer's confidence. In the case of business confidence there was an improvement in the index over the previous quarter which was linked to higher than expected profit levels in the quarter as well as positive expectations on the economy's performance in 2006. Consumers recorded a decline in confidence with the index reaching its lowest level ever; the main concern being that employment opportunities would worsen this year.
This divergence of expectations reveals anxieties about possible developments in the broader macro economy. For one thing, it is noteworthy that the survey results indicated that, while businesses reported higher profit levels than anticipated, they reduced their investment plans for the quarter suggesting an attitude of caution and "wait and see". Secondly, business persons expressed concerns about the pace of economic recovery after the damage from heavy rainfall last year. Additionally, they expressed fears about weakening consumer demand, ineffective government policies and the negative impact of crime on the economy.
These factors that fuelled cautious optimism by businesses clearly confirm broader anxieties relating to impending events in the first quarter such as political changes in the governing party, the expiry of the MoU and the likely impact these changes will have on the upcoming budget and its targets.
A significant point to note is that consumers also had perceptions of possible changes occasioned by the expected termination of the MoU but in their case the outlook was seen as positive as they viewed it as likely to lead to increase in income. Of course this could trigger serious social dislocation if these expectations are not met.
What is clear in all this is that in the first quarter, the management of the economy will be particularly critical, specifically implementation of policies will have to be done in a transparent manner to restore confidence for both businesses and consumers alike. Any protracted divergent perspectives by the above-mentioned groups on the likely performance of the economy would be a major handicap for economic progress.
THE OPINIONS ON THIS PAGE, EXCEPT FOR THE ABOVE, DO NOT NECESSARILY REFLECT THE VIEWS OF THE GLEANER.
