Consumer confidence dips, business optimistic

McPherse Thompson, Assistant Editor-Business

Consumer confidence decreased marginally for the first quarter to March 2011 mainly due to the expectations that although there is an anticipation of growth in the economy, there will continue to be a scarcity of jobs in the year ahead.

At the same time, business confidence hit a three-year high - although not at the level it was in 2007 - because of widespread expectation that growth in the economy will improve firms' financial position, the Jamaica Conference Board said Thursday.

The survey carried out by Market Research Services was presented by Don Anderson, the company's managing director, as fill-in for Professor Richard Curtin who analyses and normally presents the findings.

The conference board said its consumer confidence index fell from 107 to 105.9 in the first quarter survey for 2011, but it is still above the 90.8 recorded in the first quarter last year.

Although hitting 90 usually signals a healthy consumer mindset, the data showed that consumers - who Anderson noted were not forward-looking like businesses - were generally pessimistic about the year ahead in that they foresee little benefit to them even from an improved economy as there would continue to be fewer jobs and higher prices.

Overall, the data indicate that consumers have realised that the road to full economic recovery will take longer than anticipated and there would be more painful adjustments that they will have to make. Consumers are optimistic that future economic conditions will improve their financial situations, but expect that to be eroded by higher prices for goods and services. Anderson said for the sixth consecutive quarter, 90 per cent of consumers interviewed said there was a scarcity of jobs and as a result, businesses will face weaker demand.

Spending plans among consumers declined in the first-quarter survey with planned vacations posting the largest since 2009, down to 27 per cent from 30 per cent in the quarter to the end of December 2010, andMotor vehicle purchase plans remained flat at 15 per cent, but below the 17 per cent recorded at the start of 2010. Home purchase plans came in at 10 per cent, unchanged from the quarter before, and two per cent above the eight per cent for last year.

The index of business confidence rose to 124.5 in the first quarter of 2011, five per cent above the 118.9 for the quarter before, and 25 per cent higher than the 99.4 recorded at the start of last year. Moreover, it has been the highest level of confidence among businesses since the 134.2 recorded in the third quarter of 2007, the last time general elections were held.

As such, Anderson said the resurgence in business confidence may be attributed to the anticipation of the presentation of an election budget and expectations that they will benefit - either directly or indirectly - from infrastructure and other developmental projects slated to be undertaken by the Government in the run-up to general elections, constitutionally due in 2012.

Businesses also noted the shift in the incumbent government's economic policies and have dramatically reduced their complaints about the impact of crime and corruption on the economy to the challenges of increasing employment, something he said, Jamaica has in common with the United States and most of Europe.

In line with expectations by the International Monetary Fund and some local economic analysts, businesses expect continued improvements in the economy due to factors such as more favourable government policies and the stronger economies of Jamaica's main trading partners, although few expect a robust pace of growth during this year.

A record number of firms, 66 per cent, expect their balance sheets to improve due to rising profits and increasing demand, up from 43 per cent at the start of 2010 and just below the all-time record of 68 per cent in the first quarter of 2007.

Anderson said that while expectations about their financial prospects continue to improve, firms will continue to be optimistic, but "if there's a downturn in the economy it is likely to result in a reduction in confidence among businesses".

Plans to increase investments in their businesses were cited by 45 per cent of respondent firms in the first-quarter survey, the same as in the previous quarter.

Among all firms, just 17 per cent reported that their profits in the past year were higher than they originally anticipated. No improvement was recorded for the previous quarter, and for the past 18 months, profits have remained at their lowest level in the past 10 years.

The conference board, the research and advisory arm of the Jamaica Chamber of Commerce, has been tracking business and consumer attitudes since 2001. The indices are based on answers to questions from a survey of 600 persons and 100 firms taken through January to March nationwide.

mcpherse.thomson@gleanerjm.com