Disparity in business and consumer confidence
Published:Wednesday | January 12, 2011 | 12:00 AM
Jamaican businesses are reportedly upbeat on the outlook for the economy, projecting better profits in the future during the final three months of 2010.
But the profit outlook appears hinged more to a perceived improvement in the investment climate than on better sales. This was reflected in the latest business and consumer confidence research, which showed an uptick in business confidence near record-high levels even as consumer confidence dipped.
"Business confidence has really improved and is not at a peak but it is near the peaks, in the prior 10 years," University of Michigan Professor Richard Curtin said yesterday as he discussed the findings of the quarterly surveys done for the Jamaica Chamber of Commerce.
Commenting on the disparity in confidence levels in groups, Curtin said the difference augured well.
"This kind of change is not uncommon in this stage in a recession that business firms typically sense conditions changing before consumers and this is a very positive outlook," he said.
"Business folks have truly sensed the shifting economy and consumers will catch up."
The Index of Business Confidence recorded 118. 9 points, up from 113 points in the previous three months and significantly above its 106.6 points in the fourth quarter of 2009.
Curtin reported that businesses are more optimistic about the future of the economy, but this was in contrast with their still dismal assessments of the current economic conditions. He said the favourable level of economic expectation was primarily the result of a much-improved outlook for the Jamaican economy, as well as what firms judged to be a favourable climate in which to profit from investments.
"Business expects improvement, and this is a widespread sentiment, and it is not that they are much more confident than they were last quarter, it is simply that they are very confident," Curtin said, explaining the slight rise in business confidence over the third quarter.
Meanwhile, Curtin said 48 per cent of the 100 firms surveyed by Don Anderson's Market Research Services Limited reported positive investment plans, marking a record level on that score.
And while not happy with the current economic climate, the firms reported that their balance sheets had improved.
Things are not quite as rosy among consumers, who are expected to find the cash to purchase the goods and services of businesses. Curtin reported a slight decline in consumer confidence at the close of 2010 due mainly, he said, to the impact of the dreary outlook for economic growth recorded among residents of the country's resort areas.
"Consumer confidence is down mainly due to the tourist residents, but it is at the low end of the range, so this is really classic distinction where business has improved first and consumer had not yet improve."
The measurement showed the Index of Consumer Confidence at 107 in the fourth quarter, down from 109.8 points in the previous three months, but still higher than the 102.1 points recorded in the fourth quarter of 2009.
High cost
Curtin said consumers expected difficult times in the years ahead, citing concerns over what he said was the generally high cost of living and higher taxes.
He noted that very few persons believed that poor leadership of the Government was the reason for the current state of the economy.
Despite consumers being slightly less optimistic than last quarter about the prospects for the economy, the majority of those captured in the survey expected gradual improvement in the year ahead.
Forty-one per cent of the 600 consumers surveyed in the fourth quarter last year expected the economy to worsen, down significantly from 48 per cent at the close of 2009.
On job prospects, for the fifth consecutive quarter, about nine in 10 consumers said work was in short supply but they remained optimistic that opportunities would open up this year.