Business, consumer confidence poles apart

Professor Richard Curtin, head of the Survey Research Centre, University of Michigan. - File

Business confidence among Jamaican firms improved in the last quarter of 2009, but consumer confidence continued to decline, researcher Professor Richard Curtain said Tuesday.

"When you combine the two indices, you can see that confidence is rather flat because consumers fell and business rose - consumers fell by 3.3 per cent and business rose by 5.5 per cent and that extra gain on the business side led to the overall (result)," said Curtin, the head of the Survey Research Centre, University of Michigan.

"One might say who is correct? Do business firms have a direct feel for the pulse of the economy or does the consumer?"

Business firms optimistic

The indices, which surveyed some 100 local companies, found that business firms were optimistic about making a profit during the next 12 months.

The Index of Business Confidence was 106.6 in the fourth quarter of 2009 up from an all time low of 75.8 at the start of 2009 but still well below its peak of 134.2 in the third quarter of 2007.

"From the low point in the first quarter of 2009, it improved by 41 per cent," said Curtin. "If you were looking at this, you would get the sense that most Jamaican businesses expect the traditional 'v' shaped recession and we will race out in recovery."

Curtin reported, however, that current profits were below expectations among all firms, with 40 per cent reporting in the fourth quarter survey that last year's profits were less than they had anticipated, down from an all time peak of 49 per cent recorded in the third quarter but still above the 34 per cent recorded a year ago.

Firms were also pessimistic about opportunities to profit from investments. Thirty per cent of firms in the quarter under review indicated positive investment plans. This was less than the 40 per cent recorded in the third quarter. Only 41 per cent planned investment in plant and equipment during this year.

Fifty-eight per cent of all business firms expected substantial improvements in their balance sheet, which was more than twice the 24 per cent recorded at the start of 2009.

Meanwhile, confidence remains low among consumers.

The Index of Consumer Confidence was at 102.1 in the fourth quarter survey, slightly above the 96.0 in the first quarter of 2009 but well below the 125.7 in the fourth quarter of 2008, with expectations that jobs will continue to be scarce.

"They expect the downturn to continue," Curtin said. "In this last survey, 92 per cent said jobs were not available and they complain about smaller incomes and remittances, and their spending power have declined," said Curtin of the 604 consumers surveyed.

"Put together, I think that the Jamaican consumers think that the downturn still lingers — it may not get any worse but it is not improving."

One might say who is correct? Do business firms have a direct feel for the pulse of the economy or does the consumer? - Curtin