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Business confidence at all-time low - Consumers also pessimistic about jobs, economy
Business confidence in Jamaica has plunged to an eight year low for the first quarter this year, dipping to the lowest level registered since the Jamaica Conference Board started its survey in 2001.
With many Jamaicans expecting the current recession to continue throughout 2009, poor job prospects, smaller income gains, remittance to decline and weakened spending plans have combined to make consumers, too, more depressed by the gloomy economic picture.
The survey's index of consumer sentiment also fell in the first three months of this year, reaching 96 points from 125.7 in the previous quarter and 142.4 in the first quarter of 2008.
The business confidence index was measured at 75.8 points for the first three months of 2009, down from 89.9 in closing quarter last year.
"When we asked them to explain why they are giving these negative views, they talked about recession among their trading partners, the fall in the Jamaican dollar and credit conditions constraints, rising employment and falling income - all the things that we know are true," said Professor Richard Curtin, head of the Survey Research Centre at the University of Michigan, which collaborates with the Jamaica Chamber of Commerce to analyse the survey data.
From the data, presented by Curtin on Tuesday, expectations are that the current recession will persist during 2009, with the global downturn further weakening domestic demand.
Meanwhile, 55 per cent, or just over half of the 100 firms surveyed, anticipate a worsening of economic conditions. This essentially represents the same number registering a negative outlook in the previous quarter, but well above the 31 per cent expressing pessimism at the start of the year.
That more businesses are not taking a dimmer view of the future, the survey commentary attributed to an underestimation of the impact of the declines in exports, tourism and remittances.
"I would have thought that this would have been much more negative than it is. That 55 per cent expect the economy to worsen is a terrible enough statistic, but in the US, it is more like 80 per cent expecting the economy to worsen. So, I am puzzled by this statistic," Curtin said.
Depressing news
At the same time, more companies, 44 per cent, in fact, expected their financial position to worsen, up from 17 per cent at the close of 2008 and just 10 per cent a year ago.
Other depressing news from the survey includes 44 per cent reporting that last year's profits were less than they had anticipated.
This is a 10 percentage point increase from the 34 per cent recorded at the close of 2008 and the worst outcome in more than five years. Only 12 per cent of all firms said that last year's profits were better than they had expected.
At the same time, lower profit margins for this year are expected by 38 per cent in the survey, up from 25 in the previous quarter and just one per cent in the first quarter of 2009. This was the worst profit expectation recorded since the survey began in 2001, the survey commentary has noted.
The survey also showed that two-thirds of all firms still thought it was a bad time to invest in expansion.
"Their perception of investment opportunities now? Their expec-tations have been crushed," Curtin concluded.
This is despite a nine percentage point increase in plans among business to invest.
"The rebound in plans to invest in the expansion of their firms was quite small, with positive investment plans rising to just 29 per cent in the first quarter of 2009 from the all-time low of 20 per cent at the close of 2008," the report noted.
"The only exception to the downward trend in business sentiment was a slight improvement in firms' assessment of the current investment climate," the report on the finding pointed out. "It rose from the lowest level ever recorded at the close of 2008 to the second lowest level ever recorded."
Spurred by spending
But even this, the only one of five index components to register an improvement is being questioned by the surveyors.
"While good investment opportunities may now be available, whether this gain represents a turning point or simply corrects a false low point in the last survey is yet to be determined. In any event, the improvement still leaves investment plans at very unfavourable levels," it said.
Curtin believes that recovery from the recession must be spurred by government spending.
"Both consumers and business firms have felt the pinch. For consumers, it is a lack of jobs, decline in incomes and rising employment. This is the darkest part of the recession," he said.
He expressed the view it would be in the best interest of the Jamaican government to also roll out projects to improve the economy.
"As the recession lengthens and deepens the social cause will increase, and will increase by a tremendous amount, and my view of government is not to in the end balance their budget, but rather by taking care of their people."
dionne.rose@gleanerjm.com
http://www.jamaica-gleaner.com/glean...business1.html
Business confidence in Jamaica has plunged to an eight year low for the first quarter this year, dipping to the lowest level registered since the Jamaica Conference Board started its survey in 2001.
With many Jamaicans expecting the current recession to continue throughout 2009, poor job prospects, smaller income gains, remittance to decline and weakened spending plans have combined to make consumers, too, more depressed by the gloomy economic picture.
The survey's index of consumer sentiment also fell in the first three months of this year, reaching 96 points from 125.7 in the previous quarter and 142.4 in the first quarter of 2008.
The business confidence index was measured at 75.8 points for the first three months of 2009, down from 89.9 in closing quarter last year.
"When we asked them to explain why they are giving these negative views, they talked about recession among their trading partners, the fall in the Jamaican dollar and credit conditions constraints, rising employment and falling income - all the things that we know are true," said Professor Richard Curtin, head of the Survey Research Centre at the University of Michigan, which collaborates with the Jamaica Chamber of Commerce to analyse the survey data.
From the data, presented by Curtin on Tuesday, expectations are that the current recession will persist during 2009, with the global downturn further weakening domestic demand.
Meanwhile, 55 per cent, or just over half of the 100 firms surveyed, anticipate a worsening of economic conditions. This essentially represents the same number registering a negative outlook in the previous quarter, but well above the 31 per cent expressing pessimism at the start of the year.
That more businesses are not taking a dimmer view of the future, the survey commentary attributed to an underestimation of the impact of the declines in exports, tourism and remittances.
"I would have thought that this would have been much more negative than it is. That 55 per cent expect the economy to worsen is a terrible enough statistic, but in the US, it is more like 80 per cent expecting the economy to worsen. So, I am puzzled by this statistic," Curtin said.
Depressing news
At the same time, more companies, 44 per cent, in fact, expected their financial position to worsen, up from 17 per cent at the close of 2008 and just 10 per cent a year ago.
Other depressing news from the survey includes 44 per cent reporting that last year's profits were less than they had anticipated.
This is a 10 percentage point increase from the 34 per cent recorded at the close of 2008 and the worst outcome in more than five years. Only 12 per cent of all firms said that last year's profits were better than they had expected.
At the same time, lower profit margins for this year are expected by 38 per cent in the survey, up from 25 in the previous quarter and just one per cent in the first quarter of 2009. This was the worst profit expectation recorded since the survey began in 2001, the survey commentary has noted.
The survey also showed that two-thirds of all firms still thought it was a bad time to invest in expansion.
"Their perception of investment opportunities now? Their expec-tations have been crushed," Curtin concluded.
This is despite a nine percentage point increase in plans among business to invest.
"The rebound in plans to invest in the expansion of their firms was quite small, with positive investment plans rising to just 29 per cent in the first quarter of 2009 from the all-time low of 20 per cent at the close of 2008," the report noted.
"The only exception to the downward trend in business sentiment was a slight improvement in firms' assessment of the current investment climate," the report on the finding pointed out. "It rose from the lowest level ever recorded at the close of 2008 to the second lowest level ever recorded."
Spurred by spending
But even this, the only one of five index components to register an improvement is being questioned by the surveyors.
"While good investment opportunities may now be available, whether this gain represents a turning point or simply corrects a false low point in the last survey is yet to be determined. In any event, the improvement still leaves investment plans at very unfavourable levels," it said.
Curtin believes that recovery from the recession must be spurred by government spending.
"Both consumers and business firms have felt the pinch. For consumers, it is a lack of jobs, decline in incomes and rising employment. This is the darkest part of the recession," he said.
He expressed the view it would be in the best interest of the Jamaican government to also roll out projects to improve the economy.
"As the recession lengthens and deepens the social cause will increase, and will increase by a tremendous amount, and my view of government is not to in the end balance their budget, but rather by taking care of their people."
dionne.rose@gleanerjm.com
http://www.jamaica-gleaner.com/glean...business1.html