Identifier
Created
Classification
Origin
05KINGSTON1758
2005-07-18 20:33:00
UNCLASSIFIED
Embassy Kingston
Cable title:  

BUSINESS CONFIDENCE REMAINS STRONG

Tags:  ECON EFIN JM 
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This record is a partial extract of the original cable. The full text of the original cable is not available.
UNCLAS KINGSTON 001758 

SIPDIS

STATE FOR WHA/CAR/ (WBENT),WHA/EPSC (JSLATTERY)

SANTO DOMINGO FOR FCS AND FAS

TREASURY FOR L LAMONICA

E.O. 12958: NA
TAGS: ECON EFIN JM
SUBJECT: BUSINESS CONFIDENCE REMAINS STRONG

UNCLAS KINGSTON 001758

SIPDIS

STATE FOR WHA/CAR/ (WBENT),WHA/EPSC (JSLATTERY)

SANTO DOMINGO FOR FCS AND FAS

TREASURY FOR L LAMONICA

E.O. 12958: NA
TAGS: ECON EFIN JM
SUBJECT: BUSINESS CONFIDENCE REMAINS STRONG


1. Buoyed by improved economic performance and favorable
financial prospects for individual firms, Jamaican
business confidence remained strong during April to June

2005. In fact, business confidence during the first two
quarters of 2005 was higher than at any other time in the
four-year history of the surveys. While consumer
confidence waned relative to the first quarter, it
remained well above 2004 levels. This according to the
latest survey of business and consumer confidence
conducted by Professor Richard Curtin of the University of
Michigan on behalf of the Jamaica Conference Board.


2. Based on the survey released on July 5, business
confidence remained strong during the second quarter of
2005, with firms in all industries and of all sizes
anticipating a surge in economic performance and improved
financial prospects for their firms. This is not
surprising given that 33 percent of businesses reported
greater than expected profits in the June quarter, the
highest proportion of firms since the inception of the
survey. In addition, over 40 percent of all businesses
thought it was a good time to expand output due to
declining interest rates and the memorandum of
understanding between the GOJ and trade unions.


3. Almost 66 percent of all firms expected a faster or
unchanged pace of economic growth during upcoming periods,
the fifth consecutive quarter of optimistic outlook for
the economy. This bullish mood was underpinned by reduced
interest rates, stability in the foreign exchange market
and increased foreign direct investment. Similarly, over
62 percent of Jamaican firms expected their financial
performance to improve during the year ahead. Business
survey responders were quick to point out that increasing
oil prices and the persistence of crime were the two major
barriers to faster economic growth. In fact, firms
pointed out that their capital expenditure would increase
if the costs and uncertainty associated with crime and
violence were removed. Additionally, almost 85 percent of
all firms surveyed expected inflation to increase in the
year ahead.


4. According to the survey, consumer confidence in the
June quarter declined relative to the first quarter of
2005, but remained above 2004 levels. However, nearly all
the second quarter loss in confidence occurred in Kingston
due largely to crime, high taxes, increased inflation and
unemployment. While consumers had a favorable view of the
current state of the economy, they were less upbeat about
future economic prospects. Consumers like businesses were
quick to point to the adverse impact of rising prices and
higher taxes as well as persistent crime. Jamaicans also
continued to hold a negative view of employment
opportunities, with 85 percent of those surveyed citing
the lack of job opportunities. When asked about the
future prospects, consumers voiced the most pessimistic
view in two years. Over 33 per cent of Jamaicans surveyed
expected to receive remittances, with over half reporting
an increase in the amount received during the past three
years. Consumers expressed less favorable purchase plans
than in previous surveys, despite the expectation of
higher remittances and increased income to cushion the
inflationary impact.

TIGHE