The Bank of Jamaica says that it expects, on a net basis, to issue an additional $10.6 billion - up 15.8 per cent on last December - in cash to the Jamaican economy this month to help to facilitate the traditional Christmas shopping spree.

But with inflation running at 13 per cent for the year, consumers can expect fewer, and less bulky packages for their expenditure, whether they utilise their access to more bank notes or coins or other forms of cash.

As expected, the usual pre-Christmas increase in demand for cash has maintained this year, even though the BoJ expects that, in the end, the rate at which it has to issue currency this year will be slower than in December last year. Two primary factors will account for this: more people are using systems other than cash, such as plastic, to pay for their goods and services, and there have been no big near yearend wage settlements such as was enjoyed by public sector workers in 2006.

Nonetheless, the BoJ says that at December 11 the stock of currency in the economy stood at $40.6 billion, an increase of $2.1 billion or 5.6 per cent more than at the start of the month. Compared to the same period a year earlier, the increase was 19.4 per cent.

The central bank projects that currency issue to continue to spike as its gets closer to Christmas and peaking at around $51.7 billion by December 27. For the whole of December the currency issue, that is, the cash people have in their hands and what banks have in their vaults, will total $49 billion. This will represent a net increase - the difference between what the BoJ puts in the market and what it redeems - of 27.5 per cent over November, roughly the same growth as for the comparative period last year.

Five-year high

However, on a year-on-year basis, this year's 15.8 per cent net increase in currency issue will be nearly three percentage points lower than the 18.7 per cent in December 2006.

According to the BoJ, last year December's demand by the economy for additional cash, which was at a five-year high, "was mainly driven by the increase in public sector wages and salaries resulting from the settlement of the Memorandum of Understanding between the government and the trade unions following two successive years of wage freeze".

"... The non-repetition of significant upward adjustments to wages and salaries in 2007 as well as increased use o means of payments, such as point-of-sale transfers, credit cards and cheque have partially off-set the increased demand for currency arising from higher inflation," says the BoJ. "Consequently, annual growth of currency is expected to be lower than the growth which obtained in 2006."