Review of Jamaica’s Economic Performance July- September 2020

Overview of Real Industry Developments 

• For July to September 2020, real GDP fell by an estimated 11.3% relative to the corresponding quarter of 2019. The Goods Producing and Services Industries contracted by 3.6% and 13.0% respectively.

• Within the Goods Producing Industry, there were decreases in output for the Mining & Quarrying (22.9%), Manufacturing (8.7%) whereas Construction and Agriculture, Forestry & Fishing increased by 5.0% and 2.0%, respectively.
• All industries within the Services Industry recorded a fall in real value added for the second quarter 2020, excluding Producers of Government Services. The industries estimated to have registered the largest contraction were Hotels & Restaurants (down 63.8%); Other Services (down 34.3%); and Transport, Storage & Communication (down 17.4%).
• For the first nine months of 2020, real GDP is estimated to have decreased by 10.7%. The Service’s Industry was estimated to contract by 11.4% while the Goods Producing Industry was estimated to contract 6.0%. All industries observed a contraction in output, with the exception of Agriculture, Forestry & Fishing (up 0.3%) and Producers of Government Services (up 0.2%).  The downturn for the nine-month period was led by Hotels & Restaurants (down 53.3%).

Production Performance by industry

The Agriculture, Forestry & Fishing industry’s output was estimated to have increased 2.0%. Performance for the quarter was attributed to “the impact of favourable weather conditions as well as initiatives implemented by the GOJ to improve output in the industry. These included the Productivity Incentive Programme which provided fertilizer and seedlings to farmers and the Agriculture Excess Buy Back Programme which provided a market for farmers’ produce in light of the oversupply as a result of reduced demand caused by COVID-19,” as noted by PIOJ.  The main contributor was the category Other Agricultural Crops which increased by 8.4% due to increased output in Fruits (up 28.3%), Condiments (22.3%), Other Tubers (21.3%), Cereals (17.2%), and Vegetables (15.3%). Nevertheless, Traditional Export Crops declined by 0.2% due to the absence of sugar cane production, as well as a 41.4% downturn in Cocoa production as Banana production grew by 1.7%. Whereas, Animal Farming experienced lower output due to lower broiler meat production. Egg production, however, grew by 24.6% to 53.4 million eggs.

Real value added for Mining & Quarrying industry fell by 22.9%. This down-turn reflected a decline in alumina and crude bauxite production. Alumina production fell by 24.3% largely attributable to the operational closure of the Alpart refinery. PIOJ noted that, “the refinery will be closed for a period of 18 to 24 months, to facilitate the execution of upgrade and expansion works.” There was a fall in the alumina capacity utilization rate to 44.9%, down 14.4 percentage points. Crude bauxite production decreased by 8.5%, attributable to lower demand from overseas purchasers, with associated increase in the average bauxite utilization rate to 51.9%, down 4.8 percentage points.

The Manufacturing industry registered a decrease of 8.7%. This drop resulted from lower output both the Food, Beverages & Tobacco and Other Manufacturing sub-industries. With respect to Food, Beverages and Tobacco, lower production were observed for Poultry Meat (down 28.6%); Animal Feed (down 13.3%); Dairy Products (down 21.7%); Edible Fats (down 7.5%); Rum & Alcohol (down 1.0%) and Carbonated Beverages (down 3.4%). Whereas, in the Other Manufacturing category, lower output stemmed from an estimated decline of the production of Petroleum Products and Rubber & Plastic Products. PIOJ also stated that, there was lower output in Petroleum Products “due to a reduction in the refinery service factor for two of the three months of the quarter.  The refinery service factor declined by 50.3 percentage points to 49.7%.  All products surveyed recorded lower output, including: Gasoline, down 58.4%; Liquid Petroleum Gasoline (LPG), down 72.6%; Automotive Diesel Oil (ADO), down 51.2%; Fuel Oil, down 68.8%; and Turbo Fuel, down 80.9%.”

Real value added for the Construction industry rose by an estimated 5.0%. This was due to growth in both the Other Construction and Building Construction components. This performance was attributable to a real increase by 18.3% in the sales of construction related inputs. Notably, Cement supply to the local market recorded an increase of 148.5%. The growth in Other Construction was due to the increase in capital expenditure on civil engineering activities, namely: National Works Agency, which disbursed $5.3 billion relative to $2.7 billion in the corresponding quarter of 2019 and NROCC, which disbursed $1.4 billion relative to no disbursement in the corresponding quarter of 2019. This NROCC expenditure was directed towards the design and mobilization for the South Coast Highway Improvement Project. Whereas, the growth in Building Construction was due to increased hotel construction and the build out of commercial office spaces. A decline in Housing Starts by the NHT down by 475 units to 400 units has offset the growth.

Reduced activities in the Transport & Storage component resulted in a contraction in real value added for the Transport, Storage and Communications industry of an estimated 17.4%. This decline was driven by a decrease in air transport due to lower air passenger movement, down 82.4%, and an 18.6% decline in total air cargo movement. There was also a contraction in maritime transport activities due to lower cargo movement, down 20.8%.

Reduced electricity and water consumption resulted in a contraction in real value added for the Electricity & Water Supply industry by 6.9%. Electricity consumption decreased by 8.4% resulting from lower consumption in all categories with the exception of the Residential category. There were lower sales to General Service (small businesses using less than 25 kilo volt ampere (kVa), down 11.8%; Power Service (large businesses using more than 25 kVa but less than 500 kVa), down 11.4%; Large Power (businesses using more than 500 kVa), down 10.9%; Largest Power (Rate 70), down 24.7%, and Street Lighting & Other, down 25.0%. Residential consumption increased by 1.8% possibly due to stay-at-home measures implemented by the GOJ to stem the spread of COVID-19.  Furthermore, water consumption declined by 0.9%, due to lower consumption in the Western division (down 10.2%) which outweighed the increased consumption in the Eastern division (up 3.8%).

The impact of measures implemented to limit the spread of the COVID-19 pandemic led to an estimated decline in real value added in the Finance & Insurance Service industry by 4.5%. There was also a decline in the return on investment; and a fall-off in fees and commission income.

Real Value Added in the Wholesale & Retail Trade; Repair and Installation of Machinery (WRTRIM) fell by an estimated 7.5% and was due to adverse impact of COVID-19 and measures implemented to stop the spread of the virus on Business and Consumer confidence and employment levels. Furthermore, the decline in the industry was offset by a 38.5% in real rise in remittance inflows for July 2020, compared to July 2019. Reduced sales were recorded for six of the eight categories, with the largest declines recorded in: Textiles (down 32.3%), Clothing, Shoes & Jewellery (down 25.2%); Minerals, Fuels, Lubricants & Petroleum Products (down 25.2%); Other Wholesale and Retail Sale of Goods and Services in Specialized & Non-specialized Stores (down 17.1%); and Motor Vehicles, Auto Repairs & Accessories (14.8%).

Real value added for the Hotels and Restaurants industry decreased by 63.8%, reflecting a decline in Total Stopover Arrivals by 81.8% and the absence of cruise passenger arrivals due to concerns related to the heightened possibility of spread of COVID-19 on cruise vessels. Notably, PIOJ highlighted that, “lower arrivals were recorded by the main source markets, reflecting  USA, down 78.3% to 97,667 persons; Europe, down 91.2% to 6,924 persons; and Canada, down 88.2% to 7,928 persons.” Furthermore, total visitor expenditure was US$215.7 million, decreasing by 74.1% when compared to the corresponding quarter of 2019.

Outlook 

PIOJ highlighted that, “the prospects continue to be negative, given the impact of the spread of COVID-19 and the measures implemented to manage its spread on the domestic economy.  Despite the relaxation of some measures, others remained, including, nightly curfews and physical distancing measures. Another contributor to this negative outlook is the very active Atlantic Hurricane season that has produced significant rainfall. The resultant flooding will negatively affect agricultural production as well as road and housing infrastructure.”

Furthermore, the PIOJ projects that for October–December 2020, a decline in output within the range of 9.0% to 11.0% is anticipated relative to compared with October-December 2019resulting in a calendar year contraction in the range of 10.0% to 12.0%. In addition, for Fiscal Year 2020/21, the projection is for a contraction within the range of 10% to 12%.

PIOJ noted that, “Preliminary data showed that total stopover arrivals decreased by 74.4% and there was no cruise passenger arrivals for October 2020 compared with October 2019.”

In addition, electricity consumption fell by 10.5% to 252.6 million kWh in October 2020 while electricity sales decreased by 10.5% to 252.0 million kWh relative to October 2019.

In October 2020, total bauxite production climbed 12.6% revealing a 36% increase in the output of Alumina and 3.9% increase in Crude Bauxite production compared with October 2019.

Disclaimer