Professor Richard Curtin from the University of Michigan in the United States, does quarterly analyses of the surveys of consumer and business confidence on behalf of the Jamaica Conference Board, research arm of the Jamaica Chamber of Commerce. - Rudolph Brown/Chief Photographer

Consumers remained up-beat about current economic conditions during the three months to September 2006 but the consumer confidence index still fell from its all-time peak in June, fed by a gloomy outlook on jobs for the year ahead.

Companies, however, were more upbeat about the future.

While consumer confidence was off by 2.1 per cent from the June quarter high that was driven by the election of populist Prime Minister Portia Simpson Miller, business confidence rose 15 per cent over the previous quarter.

Firms appeared confident that current and future profits would make a positive turnaround, after the 20 per cent decline in the business confidence index during the previous quarter.

Improved prospects

"The rise in business confidence reflected improved financial prospects for firms despite a small decline in expected rate of economic growth in the year ahead," said the most recent business confidence survey, published by the research arm of the Jamaica Chamber of Commerce, the Jamaica Conference Board (JCB).

The view held by firms that their profits will continue to outstrip economic growth comes against the background of the higher returns on current investments experienced by several companies, fuelling optimism about "continued improvements in profit margins during the year ahead."

Local companies, however, were still signalling an unwillingness to engage in new investments in the near future gauged by what was viewed by the 60 per cent captured in the survey who consider the climate as a 'bad time to make new investments,' up from 46 per cent which held that view in the previous quarter.

"This could reflect the fact that firms are preparing for a slower pace of economic growth or simply to bring past investments more in line with current prospects," added the summary report, which was presented yesterday morning at the Terra Nova Hotel in Kingston.

Although at 110.1, the index of business confidence is higher than the 96 recorded in the previous quarter, it remained well below the 119.3 recorded in the first quarter of 2006 and the record high of 127.3 during the three months to March 2005.

Richard Curtin, the University of Michigan professor who analyses the survey data for JCB, says the data for business confidence continues to show a "slowly declining path since the peak was recorded in early 2005."

He was, however, at pains to point out that this did not mean there was any current likelihood of a recession.

The index of consumer confidence dropped from its record high of 137.2 during the June quarter of 2006 to 134.4 during the reviewed quarter, a 2.1 per cent decline.

Consumers' view of current economic conditions rose eight per cent to 132.6, the highest on record.

In fact only 31 per cent of all consumers held "unfavourable evaluations of the current economy." Consumer optimism was most felt in tourist areas which have been the highlight of major infrastucture developments over the last few years, while the enthusiasm of Kingston's residents about their economic situation was slightly lowered.

The consumer expectations index fell from 141.8 measured in the June 2006 quarter to 134.7 in the three months to September 2006.

Consumers appear to have been affected by the prospect of an election, with a similar number referring to government policies to support their view the Jamaican economy is worsening, as those using government policy as an argument that it is improving.

There was a 14 per cent decline in expectations for future job creation, though consumers had a more positive expectation Ñ a marginal 4 per cent increase Ñ that incomes would improve.

Spending plans continue to retreat from the peaks recorded in the first quarter, falling to the "average levels" recorded during the past five years.

Both planned vehicle purchases signalled by 17 per cent of consumers, and home buying plans by 13 per cent have fallen significantly.

These "cautious" spending plans contrast sharply with the 54 per cent of all households - up from 44 per cent in the second quarter and 38 per cent a year ago - having expectations of income increases which is the "most positive expectations for income increases since survey's first began five years ago," said Curtin.

business@gleanerjm.com