May 3, 2018
Business Confidence Index
According to the Survey of Business Confidence index dipped to 136.5 points for the first quarter 2018, 2.05 points below 2017 average of 138.6 points. As stated by the report, this dip the Business Confidence index was too small to consider it an “established change in business sentiment” and as such should be considered as a “normalizing of confidence.” However, the reduction in the confidence index was more pronounce when compared to the previous quarter. The index fell by 6.1 points for first quarter 2018 versus the 142.6 point recorded in the fourth quarter of 2017. On an annual basis, business confidence fell 2.8 points.
Reflecting less optimism about future economic prospects, only 48% of firms surveyed have positive expectation about the future business conditions. This is down from the 58% recorded in fourth quarter 2017 who expected business conditions to improve. This is the lowest percentage recorded since fourth quarter 2015. According to the report, “despite this, firms did not typically expect a worsening of the economy either, instead they expected the economy to remain the same (35%).”
However, firm’s willingness to invest in new plant and equipment neared its all-time high of 141 points (4th quarter 2016) to 140 points at the start of 2018. In the 1st quarter of 2018, 65% reported that it was a good time to expand their capacity to take advantage of future opportunities. On average only 58% of firm expressed such sentiment in 2017.
The number of firms that expect gains and improved profitability in the year ahead was down by 3% and 16% respectively versus fourth quarter 2017. Firms with profit exceeding expectation dropped to 17% in first quarter 2018 from the 22% in the previous quarter. Comparing taxes levied on domestic business to those imposed by our Caribbean counterparts, 47% of business owner considered believed taxes are unfair, while 31% believed they were fairly taxed.
Crime and its associated cost was cited as the number one risk factor to business investment.
Consumer Confidence Index
On the contrary, Consumer Confidence Index bumped up for the first quarter 2018. Consumer confidence increased 8.6 points to 156.4 points, closing the quarter at its highest level in two years. As stated by the report, “income expectation over the next twelve months are driving this increased optimism.” The number of consumers expecting higher income increased to 53% in first quarter 2018 from 48% in previous quarter. This is noteworthy, as the number of consumers to receive remittance has trended downwards. “Year-to-date (YTD) average percentage receipt of remittance has been on a downward trajectory from 38% year 2016, to 36% year 2017 and now 34% so far in 2018.”
The majority of consumers were of the view that current business conditions were either good(19%) or average (59%). Hence, consumers in the 1st quarter were more likely to have a positive outlook for job prospects (35%) than they were not (28%). The positive job outlook was driven by consumers choosing to remain optimistic and observation of persons getting jobs and/or reports of jobs being created.
The three main factors to drive consumer economic outlook to its highest since fourth quarter 2016 among some consumers (31%) are, consumers own observation of growth in the economy, a decision to remain optimistic and confidence in the Government’s efforts. However, a larger percentage (40%) of consumers are expecting a worsening of the economy. The negative economic outlook is due to consumers assessment of crime and violence.
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