Businesses slightly less optimistic in April

LAST MONTH, companies became less optimistic about future business conditions than they were at the start of the year.

But they were less moody about the current state of affairs, according to the latest survey of inflation expectations published by the Bank of Jamaica (BOJ).

The index of present business conditions fell marginally from 162.6 in February and 164.9 in December to 161.5 in the April survey. Still, it remained around the highest level seen in three years. Also, the movement in the index continues to reflect a general upward trend in companies viewing the current business environment as being better than a year before.

The index of future business conditions declined more sharply. It fell from 152.2 in February and 157 in December to 140.7 in the latest survey. More companies thought business conditions would be worse off i n a year’s time than those which held that view at the start of 2015. However, the index remained well above t he year-earlier position of 117.9, albeit below the level recorded three years ago – the index of future business conditions stood at 141.2 in April 2012.

Present and future business conditions have historically fallen in the early months of each year, reflecting a retraction from the build-up in optimism which occurs at the turn of a new year.

Businesses’ view of the future tends to be influenced by where they think input costs are heading. Respondents to the survey continued to feel that higher cost of utilities over the next 12 months would generate the largest increase in production costs. On the other hand, less than a third felt this way in April, compared with 45 per cent last October.

RISING FUEL COSTS

Businesses are becoming more concerned about the cost of fuel and transportation, which surpassed the cost of raw materials as the production input expected to have the third largest impact on their operation.

“Wages and salaries continued to be the input cost least expected to increase over the next 12 months,” said the BOJ report.

Indeed, real wages have fallen by more than 17 per cent over the past three years, according to the central bank’s quarterly monetary policy report for December. However, the BOJ expects real wages to rise marginally over the next four quarters, according to its March 2015 monetary policy report.