Survey of Business and Consumer Confidence Fourth Quarter 2018 Summary

Date: January 22, 2018

Today, The Jamaica Chamber of Commerce announced the results of the 2018 4th Quarter Business and Consumer Confidence Indices at the JCC Secretariat. The presentation was led by Mr. Don Anderson – Managing Director, Market Research Services Ltd.

Business Confidence Index

According to the Survey of Business Confidence Fourth Quarter 2018 Summary Report, The Business Confidence index increased to 147.5 points, up from 140.2 points recorded in Q3 2018, a similar 7 points increase of Q4 2017 suggesting the index is positively affected by the busy Christmas season.

Firms are of the idea that economic growth increased, with 65% of these businesses reporting that this will occur over the next year, as compared to Q3’s 48%. This is equivalent to the proportion that was reported in Q2 2018 and has resulted in a jump to 139 points from 132 points, the first upward trend since Q2 of 2018.

The view of investment plans by firms have soared as their willingness to invest in new plant and equipment sees its highest in the history of its survey. This moved up to 151 points surpassing the 141 points recorded in Q2 2016. There were over 70% of firms surveyed who agreed that the timing was right for expansion, still greater than the average of 2017 (58%). In addition, 55% of the firms had concrete plans in place to increase the level of capital investment over the next year. Notably in the last quarter of 2018, crime and its associated costs continues to be the main barrier in facilitating expansion. It should be recalled that the devaluation of the dollar was the main contributor to the adverse investment plans.

This increased optimism about future economic prospects has translated to firms expecting stability in their future business conditions. When asked to assess their firm’s financial prospects, 79% expected gains in the year ahead while 71% expected improvements in the profitability of their firm. This represents a change of +2% and +5% points respectively since the 1st quarter 2018. As such firms remains hopeful in the internal strategies they have employed.

The survey showed that the proportion of firms with profits exceeding expectations was 14% in the 1st quarter, reflecting a slight change relative to 17% of last quarter. Based on the firms interviewed, 58% expected profits (six out of every ten), while the proportion that reported an
unfavourable profits was 28%, a decline from the 25% in the third quarter.

For 2019, an estimated one in every four firm is determined in increasing its sales and in turn profit in 2019. This is hoped to be achieved by increasing customer base, improving the quality of service offered and remaining relevant in the market.

Consumer Confidence Index

This optimism continued on its upward trajectory as consumer confidence strengthened in the 4th quarter 2018. The consumer index was 175.5 points for the 4th quarter of 2018 relative to that of 172.6 points for the 3rd quarter of 2018 since the beginning of the survey in 2001. However, this rate slowed significantly between Q3 and Q4 2018 relative to the surge between Q2 and Q3. The observation of job creation and as well as new investors to the market have driven this confidence. This has also been expressed in the ability of the current government to improve the job situation.

Notwithstanding, the increase in the consumers’ confidence, the expectations for income gains were stable, anticipated by a 50% in the 4th quarter. Notably, 35% of these consumers received remittances, where year-to date, the average percentage receipt of remittances stood at 36% similar to 2017’s average.

The views of consumers relating to current growth in economic conditions grew by almost 39 index points since the 1st quarter of 2018. Their expectations for the future increased by 12 points. An improved outlook for the economy (year-ahead) was expected by 36% in the fourth quarter of 2018, no change since Q3. The positive views of consumers were due to their perceptions of jobs being created (20%) and trusts in the initiatives and plans of the Government (21%). On the other hand, there were consumers who were not as optimistic and were anticipating a deteriorating of the economy (31%) which were due to the lack of employment (16%), high crime (14%), high prices (14%) and stagnant economy noted by high cost of living (12%).

Assessment of the current business conditions by consumers increased from 106 points in the 3rd quarter to 110 points. The proportion of consumers who assessed business conditions as being good grew to 25% which translated in the large majority of 85%, who had a positive impression of business conditions. There is also further improvement being anticipated by 41% of consumers which will translate in an increase in the Index of Expected Business Conditions to 125 points in Q4.

For the 4th quarter of 2018, consumers continue to have a positive outlook for job prospects. Nine percent (9%) believed that that jobs will be abundant while 44% expected job situations to improve over the next year. These resulted in no change in the index of the current job situation of 55 points and an increase in expected jobs 123 points up from 119 points. Positive job outlook was due to the observations of persons being employed and/or reports of job creation (28%).

Consumers appear to be more certain of their potential to purchase a home, car and to take a vacation. Notably, there was a marginal change of “2% points” in proportions of consumers that will be able to take a vacation or to purchase a car while there was no change in the 9% who expected to buy a house.

Commercial banks were estimated to be the main beneficiary of additional income as indicated by 27% of the respondents. It is important to note that 24% did not intend to save or invest any extra earnings while credit unions (20%) and private partners (11%) were the other main beneficiaries.

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