Businesses not satisfied with control of inflation
THERE HAS been a decline in the number of business people who are satisfied with the way inflation is being controlled, according to the March 2017 survey of businesses’ inflation expectations, conducted on behalf of the Bank of Jamaica (BOJ).
It also found there was an increase in the proportion of respondents who were ‘dissatisfied’ and ‘very dissatisfied’ about the way inflation is being controlled.
The Statistical Institute of Jamaica undertook the survey of businesses on behalf of the BOJ to ascertain the expectations of economic agents about variables which are likely to have an impact on inflation in the near term.
It captures the perceptions 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 and salaries.
The BOJ said the responses assist it in charting future policy decisions. The most recent survey was conducted between March 13 and April 7, and had 316 respondents.
Businesses’ perception of the BOJ’s control of inflation declined in the survey. Specifically, the central bank said in the survey report released this week that the index of inflation control decreased to 267.8 in the current survey from 327.5 in the previous study, largely due to a decrease in the proportion of respondents who were satisfied and an increased in the number of those who were dissatisfied and very dissatisfied.
In another report, the BOJ said that for April 2017 there was inflation of 0.3 per cent, which compares to deflation of 0.4 per cent recorded for the same period last year, and average inflation of 0.1 per cent for April of the last five years.
Given the April 2017 out-turn, it said, annual point-to-point inflation was 4.8 per cent, above the 2.4 per cent at April 2016 and the three per cent out-turn at March 2017.
In the inflation expectations survey, both the present and future business conditions indices also decreased relative to the previous study.
The present business conditions index declined to 205.2 from 232.2 in the previous survey, while the index of future business conditions fell to 157.9 from 178.7 attained in the previous survey.
“The decrease for both indices reflected a reduction in the number of respondents who are of the view that conditions are or will be ‘better’, accompanied by an increase in the number of respondents of the view that conditions are or will be ‘worse’,” said the survey report.
In the survey of inflation expectations, the expected inflation for calendar year 2017 was 2.3 per cent, just above the two per cent recorded for the previous survey.
“This expectation was, however, below the actual annual point-to-point inflation of 4.1 per cent for March 2017. Respondents’ expectation of inflation 12 months ahead remained at 4.1 per cent,” the report said.
Relative to the previous survey, respondents adjusted upwards their outlook for the pace of currency depreciation.
Business persons expect the exchange rate to depreciate by one per cent for the threemonth horizon, higher than the 0.4 per cent expected in the February 2017 survey.
For the six-month and 12month horizons, respondents expected depreciation of 1.4 per cent and 2.2 per cent, respectively, compared to depreciation of 0.8 per cent and 1.5 per cent in the February 2017 study.
Respondents expected the 180-day Treasury bill rate, three months hence, to be 6.4 per cent on average in the three months following the survey, which was unchanged relative to the previous survey.
That expected rate is above the actual out-turn of 6.3 per cent for March 2017. Financial sector respondents expected the 180-day Treasury bill rate in the three months following the survey to be 6.3 per cent.
The majority of respondents expected that the BOJ’s open market operations rate will remain the same over the next three months.
There was a decrease in the proportion of respondents who expected the rate to be higher, which was also evident in the responses from the financial sector.
Similar to the previous survey, respondents indicated that they expect the largest increase in production costs over the next 12 months to emanate from utilities, with expected higher costs for stock replacement the second-largest contributor to production costs over the next 12 months.
There was also an increase in the proportion of respondents indicating that fuel and transport costs would increase over the next 12 months, while wages and salaries was the input cost least expected to increase over the next 12 months.