Business, consumer confidence up
Consumers continued to show confidence in the economy as the fourth quarter of 2018 saw the index increasing to 175.5 points compared with 156 at the start of the year and 148 during the corresponding period in 2017. This was largely attributed to their anticipation of jobs being created, especially in the construction sector.
Business confidence also increased to 147 points, based on expectations for a rise in economic growth and heightened expectations for improvements in their financial prospects and profitability.
Researchers said that the increase in consumer confidence meant that they were seeing five consecutive quarters of growth in this area.
As to what that confidence was built around, managing director of Market Research Services, Don Anderson, said, “What came out on top was that people believe that jobs are becoming available. The construction sector is doing very well, and in some quarters, it is regarded as booming, and therefore, whether the jobs are temporary or not is not so critically important, in that people who were not employed are now gaining employment on construction sites across the country.”
He said they were also thinking, albeit less so, about the number of jobs that are being created with the expansion of the business process outsourcing sector. “This is another area that is fuelling consumer confidence. Since the start of the survey in 2001, consumer confidence has grown gradually and has accelerated during the last four years,” said Anderson in reporting on the survey of business and consumer confidence, conducted on behalf of the Jamaica Conference Board, the research arm of the Jamaica Chamber of Commerce, at its Half-Way Tree Road secretariat, St Andrew, on Tuesday.
He noted that between 2001, when the survey started, and 2018, the consumer index averaged 118 points. Between 2001 and 2011, it averaged 110, meaning that confidence fell off during that period. However, during the periods of elections in 2002, 2007 and 2011, consumer confidence heightened. “When elections are looming, confidence grows significantly but falls off dramatically within six months of the polls,” Anderson noted.
“Since 2012/2013, we have seen a gradual growing maturity among the Jamaican people because from 2012 upwards, we can see a reduction in the reliance upon what’s going to happen during the elections and whether one is going to get a job or earn some money. We have seen a reduction in the reliance on promises being made during the elections, and that, to a large extent, is what has characterised the period 2012 to 2018, when consumer confidence averaged 129 points, and 2015 to 2018, when it averaged 145 points,” said the researcher in summing up consumers’ sentiments over the period.
“So, we can see that over the last seven years, the consumer has become, as far as we are concerned, far more mature in terms of responding to election promises, but also that period coincides with the time when Jamaica began and has since maintained a policy of fiscal discipline,” he added.
Anderson said that there are two factors that have conditioned those growth periods: the requirement to conform to the stringent reforms of the International Monetary Fund programme, and the consumer responding less to election promises “because in the three elections of 2002, 2007 and 2011, they realised that election promises are just that, promises”.
Consumers in the fourth quarter of 2018 continued to have a positive view and outlook for job prospects. However, just nine per cent of them share the view that jobs are plentiful, while 44 per cent expect the job situation to improve in 12 months. The positive job outlook continued to be driven by consumers’ observation of persons getting jobs and/or reports of jobs being created.
Their assessment of current economic conditions has grown since the first quarter of 2018, but 31 per cent are not convinced about the future economic outlook, anticipating instead a worsening of the economy, citing the lack of employment, high crime rate, high prices and a stagnant economy, manifested by the high cost of living.
Business confidence indices continued to lag consumers’ perception, though trending in the same direction, Anderson said. However, he added that understandably, businesses look further ahead because they are there for the long haul.
The business-confidence index increased to 147 points in the fourth quarter of 2018, buoyed, it seemed, by Christmas spending. Businesses believe it’s a good time to invest, with more than 70 per cent of the businesses surveyed agreeing that the time was right for expansion, exceeding the 58 per cent average in 2017.
The main barrier to expansion was identified as crime and its associated costs in the last quarter of 2018, while depreciation of the Jamaican dollar was cited as the main factor affecting investment plans in the third quarter, Anderson said.
Businesses expectations for economic growth to improve in the next 12 months increased to 65 per cent, compared with 48 per cent in the third quarter. In assessing their financial prospects, 79 per cent expected gains in the year ahead, and 71 per cent expected improvements in profitability of the businesses.
Fieldwork for the survey was conducted between October 1 and December 15, 2018, and involved interviews with 600 individuals and 100 firms.