Cautious consumers, positive businesses
MARRED by continued uncertainty in the global economic environment, businesses and consumers during the last quarter of 2022 expressed measured optimism in their outlook for 2023.
Pollster and chief executive officer of Market Research Services Don Anderson, in presenting the fourth quarter findings for the Jamaica Chamber of Commerce’s (JCC) Business and Consumer Indices, said that while a general level of confidence could be detected from the over 600 persons and approximately 110 businesses polled, it was gauged at varying degrees based on the movements across indices.
Consumer confidence, which went up by 1.8 per cent during the fourth quarter of 2022 when compared to the previous third quarter period, climbed to 160.3 points. This was 20 points above 2021 and still remaining below the 180 points it recorded in the year before the outbreak of the novel coronavirus pandemic.
“[The year] 2022, particularly the last quarter, was very significant because that’s when we started to see businesses and the economy really opening up and people being more positive. This, as people got the chance to exhale which also saw a burst of confidence [supported by record third quarter confidence levels and the festivities of Christmas]. However, where we are right now is kind of where a reality check is taking place and where people have started to slow down. In the last quarter people had started to look forward to 2023 and as such, have tempered their expectations somewhat,” he said during a virtually held briefing on Tuesday.
Tempering their expectations spurred by the recurring threats of inflation and price increases and the impacts it has had on their disposable incomes, customers also dampened their plans for purchasing homes, vehicles or taking a vacation as seen by the marginal movement in these figures. While about 30 per cent of customers expects conditions to get better this year as a result of better government policies, continued economic recovery and reduced COVID threat, more of them or approximately 40 per cent also said that conditions could get worst largely because of crime and violence, lack of employment and higher inflation.
Dr Leo-ray Gordon, economic and financial research analyst at NCB, in presenting a macro-economic outlook ahead of the findings release, said that although the projection was for the economy to demonstrate positive growth in 2023, the threat of elevated levels of inflation and interest rates amid tightened monetary policy definitely remains among real areas of concern.
“I expect inflation to average within the range of 7-9 per cent over this year, due to the strong price growth and broad base pressure from global consumption demand,” he said.
His colleague Anya Walker, executive vice-president of strategy, research, innovation and projects at NCB Capital Markets, in citing some other concerns for the environment including the continuation of geopolitical tensions and increasing talks of recession in the US, said that although these were likely to add some amount of volatility to markets, it will also not deter increasing prospects for investments and growing financing opportunities. To this end the tourism and entertainment sectors were singled out among those most poised for boosting business activity this year.
Anderson, in extrapolating comparative data from the survey, confirmed a corresponding outlook, noting the tourism and hospitality industry as one from the study indicating the strongest intention to increase capital investment this year. According to the findings, over 46 per cent of the respondents in this sector said they would be undertaking some type of investment in 2023. This was only matched by the ‘other services’ industry, which consisted of predominantly personal care and small and medium-sized enterprises, of which 27 per cent intends to undertake investment.
Businesses in general, as found by the study, though witnessing a slight fall-off of 1.8 per cent in their confidence level during the fourth quarter versus the third, was found to be more optimistic and generally feeling better about their finances and profits this year.
Approximately 53 per cent of those polled believe conditions will get better this year while the smaller 20 per cent which indicated that it could get worse pointed to crime, slower economic recovery, continued price and supply chain challenges and global trends as those posing the greatest risks.
In 2022 the business confidence index moved to 137 points, up from 124.9 in 2021, steadily moving to get back to the 143.6 points it recorded before the pandemic. Looking at the 2022 index, Anderson said it represents the “largest single increase in the last three years”, and as one which augers well and was consistent with what has been found based on the perspective of businesses polled.
“Businesses are in a pretty positive mood — their investment climate is strong, they’re beginning to look bullish again, they also believe that the economy is doing well and that their firm’s finances and profitability will improve,” he stated.
“Generally, we have seen that businesses are feeling more positive despite the slight fall-off in confidence, which can be attributed to the ballooned third quarter results, which went up by 18 percentage points. So, we kind of see where the reality is kind of hitting in, but businesses are still positive about where they are and where they are likely to go in terms of their finances and profitability,” Anderson added.
Michael Mcmorris, president of the JCC, in welcoming the data, supported the findings especially among consumers but cautioned businesses to gauge their optimism amid growing uncertainties in the global sphere.
“People seem to have a good [idea] of what is going on and what they need to be cautious about and I think that is very telling. I would, however, posit that businesses look at the numbers more carefully and rein in some of the optimism there, as we really do not know what will happen over the next 12-24 months, especially since we are primarily price takers in the global economy and so whatever happens in the US will be a huge factor for us here. As a result we will therefore need to, unfortunately, exercise some level of caution but I’m, however, pleased to see where the outcomes of 2022 are as we look forward to what will come,” he said.