Consumer and business confidence plummeted in the September quarter amid recurring COVID-19 fears regarding personal health and the economy.
Consumer confidence fell 13.8% and business confidence fell 7.0%, respectively, from the June quarter, according to new data released on Tuesday.
“Consumers reflect a similar degree of pessimism shown by businesses,” said Don Anderson, managing director of Market Research Services, whose company conducts confidence surveys on behalf of the Jamaica Chamber of Commerce.
The consumer confidence index fell to 129.2 points in the September quarter from 149.8 points in the second quarter of 2021, while the business confidence index fell to 121.7 points from 130 , 8 points.
The indices had increased during the June quarter as vaccinations increased. Confidence declined, however, amid the growing wave of COVID-19 cases during the summer months of the investigation. Anderson said attendees were understandably concerned about the virus and their ability to continue to make money.
“It’s a dramatic drop in consumer confidence,” Anderson said. “They expect the economy to toughen up,” he said.
Despite the deteriorating economic outlook, consumers believe that jobs will be more readily available. This reflects increased activity in silo industries such as construction, even amid a more general economic downturn.
“It’s interesting; almost a dilemma facing consumers,” he said of expectations of a deteriorating economy but more jobs. The unemployment rate has fallen to 12.6% at some point during the pandemic, but new jobs are now being created, including more than 93,000 in the July quarter.
The number of Jamaican households receiving remittances has fallen to 31 percent so far this year, from 35 percent in 2020. This is the lowest level since the confidence surveys began in 2010. The level ranged from 35 to 37 percent when the surveys began, fell to 33% in 2019, and then recovered somewhat to 35% in 2020.
On a cash basis, remittances have increased significantly and could set a new record this year. Year-to-date inflows have increased 24% to US $ 2.38 billion in August, from US $ 1.92 billion in the comparative eight-month period in 2020.
However, the fact that there may be a reduction in the number of households benefiting from remittances worries Anderson, who sees a potential impact on future sentiment.
“Fewer people are now receiving remittances than in any previous year,” Anderson said. “With fewer people receiving remittances, it’s entirely possible that consumers will have a harder time going through their day-to-day experiences. Because a significant percentage uses remittances to take care of daily food, school fees, books, etc. So it’s a challenge, ”he said.
Improving the outlook requires an increase in vaccinations, a drop in the COVID-19 positivity rate, a greater reopening of the economy and more tourist arrivals.
“The sooner we can get this pandemic under control, the better things will turn out,” Anderson said.
Current levels of consumer and business confidence are below the five-year average. Consumer confidence hovers at 129 points, from a high of 180 points in 2019, and business confidence at 122 points, from a high of 141 points in 2018. The larger drop in consumer confidence reflects the immediacy of the reaction of the poor to price movements. , while companies tend to have longer-term prospects, Anderson said.
John Mahfood, president of the Jamaica Manufacturers and Exporters Association, JMEA, said when releasing the indices that inflation remains a concern for businesses. He noted, however, that Jamaica’s exports to the Caribbean are now virtually at the same level as anywhere in the world. This is because it costs about US $ 500 more to ship products from outside the region to the Caribbean than from within the region.
Mahfood, who is also the CEO of tea maker Jamaican Teas Limited, said the cost of freight is now so high to Jamaica for a 20ft sea container at US $ 13,000, up from US $ 2,000 before the pandemic. , and even more in Asia to the United States, it has created opportunities for Jamaica, whose goods can be shipped to its Caribbean neighbors at a lower cost than imports from other regions.
“Jamaica now has a small competitive advantage in items produced here, which can be shipped to other Caribbean countries,” he said, explaining that freight from Jamaica to the Caribbean costs around 1,500. US $ versus China to the Caribbean, which ranges from US $ 1,500. at US $ 2,000.
“Jamaican companies are now finding that they can export competitively to the Eastern Caribbean because their products can compete with those from the Far East. I do not know how long it will last, but it is a current pivot ”, declared the president of the JMEA.