Lowest-ever perception of business conditions in Jamaica

Business

Lowest-ever perception of business conditions in Jamaica

BY DURRANT PATE
Observer Business Writer

Wednesday, August 05, 2020

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Businesses in Jamaica have recorded their lowest-ever perception of present business conditions in the country.

This, according to the latest Bank of Jamaica (BOJ) Survey of Businesses' Inflation Expectations May 2020, where the Present Business Conditions Index decreased to 43.7 relative to 114.4 recorded in the previous March 2020 survey.

The survey, which was conducted from March 1, 2020 to May 30, 2020 with 284 respondents, represents the lowest on record and can be linked to the impact of the novel coronavirus pandemic on current activities.

The decline in the Present Business Conditions Index reflected an increase in the number of respondents of the view that conditions are “worse”.

On the other hand, the Future Business Conditions Index increased to 127.1 relative to 93.7 in the previous survey.

The outturn for the Future Business Conditions Index mainly reflected an increase in the proportion of respondents who believe that conditions will be “better”, indicating expectations of a rebound in economic activity.

The survey is carried out by the Statistical Institute of Jamaica (STATIN) on behalf of the BOJ to ascertain the expectations of businesses about variables which are likely to have an impact on inflation in the near term.

In this regard, the survey captures the perception of chief executive officers, managing directors and financial controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages/salaries.

EXPECTED INCREASE IN OPERATING EXPENSES

Respondents indicated that they expected the largest increase in production costs over the next 12 months to emanate from wages and salaries, fuel and transport and raw materials. The cost of utilities is anticipated to be the least likely to increase.

INFLATION EXPECTATIONS

In the May 2020 survey, respondents' expectation for inflation for calendar year 2020 was 6.9 per cent. This expectation was above the annual point-to-point inflation of 4.7 per cent for May 2020. Respondents' expectation of inflation 12 months ahead also increased to 7.2 per cent from the previous March 2020 survey's estimate of 6.1 per cent.

PERCEPTION OF INFLATION CONTROL

Businesses' perception of the authorities' control of inflation decreased in the May 2020 survey. This was largely due to a decrease in the proportion of respondents who were “satisfied” along with an increase in the proportion of respondents who were “neither satisfied nor dissatisfied” with how inflation was being controlled.

EXCHANGE RATE EXPECTATIONS

Similar to the previous survey, respondents anticipated depreciation over all three time horizons. In the May 2020 survey, the exchange rate was anticipated to depreciate by 4.7 per cent, 5.9 per cent, and 5.1 per cent for the three-month, six-month, and 12- month horizons, respectively. This represents a higher pace of depreciation for the 3-month and 6-month horizons relative to the expected depreciation of 0.7 per cent, 1.7 per cent, and 0.5 per cent that was recorded for all time horizons in the March 2020 survey.


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