Business confidence fluctuates

Business leaders, in response to fluctuating confidence indices, expressed caution and optimism for 2023.

They expect the economy to slow, but not to the degree where it falls into recession.

Confidence rose 1.8 per cent for consumers, but dipped 1.8 percent for businesses in the December 2022 fourth quarter, compared to the third quarter.

Businesses are largely concerned about crime, a lacklustre economy, inflation, the Russia-Ukraine war and its impact on shipping of supplies, less jobs, global economic trends, and continued COVID-19 infections.

“Businesses need to look at the numbers more carefully and rein in some of the optimism there, because we really do not know what is happening for the next 12 months or 24 months. Remember that we are primarily price takers in the global economy. So what happens in the US plays a big factor in terms of what happens here, and so we have to be cautious,” said Michael McMorris, president of the Jamaica Chamber of Commerce, at the release of the new confidence data on Tuesday.

Issues relating to inflation, high interest rates and a fluctuating dollar are affecting the macroeconomy.

Metry Seaga, president of the Private Sector Organisation of Jamaica, noted that despite uncertainties, businesses have endured worse issues in the past, and would therefore be able to handle whatever 2023 brings.

“I do think that there will be some slowing down,” said Seaga. “It’s good that we do not talk our way into recession; that we do not speak about the doom and gloom.”

Despite the anticipated slowdown, Seaga expects continued economic growth, led by tourism.

Robin Russell, president of the Jamaica Hotel and Tourist Association, said the tourism sector started seeing growth in mid-2022, coming from a position of “zero”, or complete lockdown. He expects 2023 tourism arrivals to surpass 2019 record levels.

“We in tourism are seeing positive growth,” said Russell. “Our January numbers for the first week have surpassed [2019 levels]. In speaking to my hotels, I see that growth carrying [on] to the end of March. Some hotels are saying that up to early September they are very strong [with bookings]. We see new properties being built, so there is investment in the product, and as that investment happens you will see increased numbers.”

The Jamaica Chamber of Commerce, through the Jamaica Conference Board, has since 2001 tracked business and consumer confidence on a quarterly basis.

“We found that consumers continued to show a high degree of confidence in the way things are going in the country from the perspective of the economy,” said Don Anderson, executive chairman of Market Research Services Limited, which conducts the confidence surveys.

“Consumers are a little bit uncertain about what’s going to take place in 2023, against the background of significant growth and opportunity of 2022, particularly so in the third quarter of 2022,” Anderson said at Tuesday’s release of the indices.

Consumer confidence grew from 162.6 points in the third quarter to 165.5 points in the fourth quarter. Confidence still lags the highs in 2019 at 183.4 points, and also the lows in 2003 and 2013, both periods in which the index fell below 90 points.

Business confidence dipped from 147.4 points to 144.8 points in the current review period, and lags the 151.3 points recorded in 2019. The lows for business confidence were slightly above 70 points in 2009.

The survey was conducted among 600 persons between September and December, while 110 businesses spanning various industries were interviewed over the same period.

Consumers are most concerned about inflation, high crime, lacklusture governance and lack of employment. More consumers felt business conditions were good, 15.3 per cent, in the fourth quarter than in the corresponding quarter of 2021, at 12 per cent of respondents. Nearly twice as many respondents, 11 per cent, thought jobs were plentiful, compared to 5.1 per cent a year earlier.

“Consumers are quite buoyant about their own situation, despite the fact that they are cautioning the changes in the economy and job prospects for 2023,” Anderson said.

Half of the consumers interviewed expected their household income to increase, up from 41.3 per cent the prior year; while 9.4 per cent expected their household income to decrease, compared to 12.8 per cent in 2021.

Among the businesses interviewed, 24.8 per cent felt their current profits were better than expected, up from 13.7 per cent in the fourth quarter of 2021. Additionally, just 20.4 per cent of respondents felt that profits were worse than expected, compared to 40.2 per cent in the corresponding 2021 period.

Some 61.1 per cent of respondents felt it was a good time to invest versus 53.7 per cent a year earlier. Nearly a quarter of respondents, 24.8 per cent, thought that it was a bad time to invest, but that’s down from 39.8 per cent a year earlier.

Overall, there was generally high business confidence despite the fall in the index. Anderson explained that the third quarter had seen a dramatic increase in business confidence and that the fourth quarter resulted in a levelling-off of sentiment.

“We had an understandable reality check in the fourth quarter coming from the magnificent huge increases in the third quarter of 2022,” Anderson said.

steven.jackson@gleanerjm.com