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SURVEY OF BUSINESSES’ INFLATION EXPECTATIONS
JULY 2017
RESEARCH SERVICES DEPARTMENT RESEARCH AND ECONOMIC PROGRAMMING DIVISION
Inflation Expectations Survey
Prepared by the Research Services Department Page 1 July 2017 Survey
The Statistical Institute of Jamaica (STATIN) undertakes surveys of businesses on behalf of the
Bank of Jamaica to ascertain the expectations of these economic agents about variables which are
likely to have an impact on inflation in the near-term. In this regard, the survey captures the
perception 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/salaries. These responses assist the Central Bank in charting future policy decisions. The
most recent survey was conducted between 17 July and 04 August 2017 and had 320 respondents. Below are
highlights from that survey.
Figure 1: Inflation Expectations
For the calendar year 2016, the inflation rate was 1.7
per cent. What do you think the inflation rate will be
for 2017?
4.6 4.4 4.5
5.34.9 4.7
2.0 2.0 1.8
0.0
1.0
2.0
3.0
4.0
5.0
6.0
May-17 Jun-17 Jul-17
An
nu
al P
oin
t to
Po
int
Pe
r C
en
t
Actual Pt to Pt (Headline) CY Forecast CY Expectation
Figure 2: Expected Annual Inflation
Based on the last 12 months (June 2016 to May
2017) the average monthly inflation rate was
approximately 0.4 per cent. What do you think the
average monthly rate will be for the next 12 months?
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
(%)
Actual Expected
Note: (i) The responses have been annualized (ii)
the expected inflation for July 2018 reflects
responses as at July 2017 (iii) periods where no
survey was conducted assume the previous month’s
expectation.
Overview
The July 2017 survey indicated an
expected inflation of 1.8 per cent for
calendar year (CY) 2017, which was
lower than the previous survey outturn.
However, the expected inflation 12
months ahead increased relative to the
previous survey.
The perception of inflation control
worsened slightly in the July 2017 survey
relative to the previous survey.
Respondents lowered their expectations
about the pace of depreciation in all of the
three surveyed time horizons.
The majority of respondents believed that
the Bank’s OMO rate will remain the
same over the next three months.
The Index of Present Business Conditions
improved whereas the Index of Future
Business Conditions slightly worsened.
Both indices remained on an upward
trend when compared to CY2014.
Inflation Expectations
In the July 2017 survey, the expected inflation
for CY2017 was 1.8 per cent, which was
marginally lower than the 2.0 per cent recorded
in the previous survey. This expectation was
below the annual point-to-point inflation of 4.5
per cent for July 2017 (see Figure 1).
Respondents’ expectation of inflation 12
months ahead increased to 3.9 per cent, up
from the previous survey’s estimate of 3.5 per
Inflation Expectations Survey
Prepared by the Research Services Department Page 2 July 2017 Survey
cent (see Figure 2), but generally in line with
the average outturn since the start of 2017.
Figure 3: Perception of Inflation Control
How satisfied are you with the way inflation is being
controlled by the Government?1
27.9
24.4 27
.2
29.4 30
.1
28.8
30.2
23.5 33
.1
32.5
25.2
41.4
41.8
28.0
30.6 36
.4
33.8
28.2
31.3
25.6 31
.9
28.3 40
.3
36.3
42.3
43.9
37.7
44.8
36.8
37.9
40.4
43.3
38.6
42.8
29.5
30.3
29.4
25.2 27
.0 21.4
23.5
25.7
18.2
24.2
20.8
13.7
15.4
19.9
19.7 16
.9
16.9
11.0
11.7
13.8 9.
4
8.1 3.
7
5.8
6.0
4.8
4.0
6.0
4.6 2.6
8.4
8.4 5.2
3.4
0
50
100
150
200
250
300
350
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Inde
xperc
ent
Very Satisfied Satisfied Neither Dissatisfied Very Dissatisfied
.
Inflation Control Index (RHS)
*December 2005 = 100
Table 1: Exchange Rate Expectations
In June 2017 the exchange rate was
J$129.38=US$1.00. What do you think the rate will
be for the following time periods ahead, 3 months, 6
months and 12 months?
OVERALL SURVEY
Periods Ahead
Expected Depreciation
Mar-17 May-17 Jun-17 Jul-17
3 Months 1.0 1.1 1.1 0.1
6 Months 1.4 1.6 1.5 0.5
12 Months 2.2 2.6 2.3 1.3
Figure 4: 180-day T-bill
In June 2017 the 180-day T-bill rate was 6.1 per
cent. What do you think the rate will be for the next
3-months?
6.1 6.1 6.16.5 6.4 6.46.4 6.4 6.4
0
1
2
3
4
5
6
7
8
9
10
May 2017 Jun 2017 Jul 2017
% R
espo
nse
( A
ctu
al
& E
xp I
ntr
ate
)
Actual Int.rate (6mth T-bill) Exp(All) Exp Intrate(Fin)
1 Index of inflation control calculated as the number of satisfied
respondents minus the number of dissatisfied respondents plus 100
Businesses’ perception of the authorities’
control of inflation declined slightly in the July
2017 survey. Specifically, the index of inflation
control fell to 301.3 in the current survey, down
from 303.6 in the previous survey (see Figure
3). This was largely due to a decrease in the
proportion of respondents who were “satisfied”
with how inflation is being controlled.
Exchange Rate Expectations
Relative to the previous survey, respondents
adjusted downward their outlook for the pace of
currency depreciation over all three surveyed
time horizons. Specifically, in the July 2017
survey, the exchange rate was expected to
depreciate by 0.1 per cent, 0.5 per cent, and
1.3 per cent for the 3-month, 6-month, and 12-
month horizons, respectively. This compares
with the expected depreciations of 1.1 percent,
1.5 percent, and 2.3 per cent that were
recorded in the June 2017 survey (see Table 1).
Interest Rate Expectations: 180-
day T-bill
Survey respondents expected the 180-day
Treasury bill rate, three months hence, to
remain constant at 6.4 per cent. This expected
rate is above the actual outturn of 6.1 per cent
for July 2017 (see Figure 4). Similarly,
Financial sector respondents expected the 180-
day Treasury bill rate, three months hence, to
be 6.4 per cent.
Inflation Expectations Survey
Prepared by the Research Services Department Page 3 July 2017 Survey
Table 2: Interest Rate Expectations: OMO
Rate In June 2017, the Bank of Jamaica’s 30-day rate was
4.75 per cent. What do you think this rate will be for
the next 3 months?
SURVEY DATES May-17 Jun-17 Jul-17 May-17 Jun-17 Jul-17
Survey responses (percentage of total)
Significantly Lower 0.3 0.3 0.3 1.4 0.0 1.4
Marginally Lower 17.5 21.1 15.0 15.5 32.3 13.9
Remain the Same 57.6 51.9 58.1 50.7 49.2 56.9
Marginally Higher 23.2 25.3 25.3 29.6 16.9 26.4
Significantly Higher 0.6 0.3 1.3 2.8 0.0 1.4
Don’t Know 0.6 1.0 0.0 0.0 1.5 0.0
OVERALL FINANCIAL SECTOR
Figure 5: Present Business Conditions
In general, do you think business conditions are
better or worse than they were a year ago in
Jamaica?
11
0.2
12
3.6 1
55
.0
16
4.9
16
2.6
16
1.5
16
6.9
13
0.3 1
58
.4
17
1.8 19
0.4 2
26
.1
21
1.7
20
4.4
21
7.0
22
8.9
23
2.2
19
6.6
21
3.0
0
50
100
150
200
250
Au
g-1
4
Se
p-1
4
Oct-1
4
De
c-1
4
Fe
b-1
5
Ap
r-15
Ma
y-15
Jul-1
5
Au
g-1
5
Se
p-1
5
Oct-1
5
De
c-1
5
Fe
b-1
6
Ap
r-16
Ma
y-16
Jun
-16
Au
g-1
6
Se
p-1
6
Oct-1
6
De
c-1
6
Fe
b-1
7
Ma
r-17
Ma
y-17
Jun
-17
Jul-1
7
Ind
ex
of
Pre
sen
t B
usi
ne
ss C
on
dit
ion
s
*December 2005 = 100
Figure 6: Future Business Conditions
Do you think that in a year from now business
conditions will get better or get worse than they are
at present?
11
9.4 14
2.4
15
7.0
15
2.2
14
0.7
14
8.3
13
7.7
14
5.7 1
72
.1
17
1.5
15
3.0 17
5.7
16
9.1 18
6.4
17
8.7
15
7.9
16
9.7
16
7.2
0
50
100
150
200
250
Au
g-1
4
Se
p-1
4
Oct-1
4
De
c-1
4
Fe
b-1
5
Ap
r-15
Ma
y-15
Jul-1
5
Au
g-1
5
Se
p-1
5
Oct-1
5
De
c-1
5
Fe
b-1
6
Ap
r-16
Ma
y-16
Jun
-16
Au
g-1
6
Se
p-1
6
Oct-1
6
De
c-1
6
Fe
b-1
7
Ma
r-17
Ma
y-17
Jun
-17
Jul-1
7
Ind
ex
of
Fu
ture
Bu
sin
ess
Co
nd
itio
ns
*December 2005 = 100
Interest Rate Expectations: OMO
Rate
In the July 2017 survey, the majority of
respondents expected that the Bank’s OMO rate
would remain the same over the next three
months. This proportion also increased relative
to the previous survey.
Similar to the outturn for the overall survey, the
responses from the financial sector revealed
that more than 50 per cent of respondents
expected the rate to remain the same.
Furthermore, there was a significant decrease in
the proportion of respondents who expected the
OMO rate to be “marginally lower”.
Perception of Present and Future
Business Conditions
In the July 2017 survey, the Present Business
Conditions Index improved relative to the
previous survey whereas the Future Business
Conditions Index worsened slightly (see
Figures 5 and 6). The Present Business
Conditions Index advanced to 213.0 from 196.6
in the previous survey. The index of the Future
Business Conditions declined to 167.2 from
169.7 attained in the previous survey.
The increase in the Present Business Conditions
Index reflected a rise in the number of
respondents of the view that conditions are
“better.” Additionally, there was a decline in
the proportion with the view that conditions are
“worse”. The deterioration in the Future
Business Conditions Index mainly reflected a
decline in the number of respondents of the
view that conditions will be “better”. In
addition, there was an increase in the proportion
of respondents of the view that conditions will
be “worse”.
As reflected in Figure 5 and 6, both indices
remained on an upward trend when compared
to CY2014.
Inflation Expectations Survey
Prepared by the Research Services Department Page 4 July 2017 Survey
Table 3: Operating Expenses Which input do you think will have the highest
price increase in the next 12 months?
May-17 Jun-17 Jul-17
Utilities 29.0 26.3 26.9
Wages/Salaries 8.3 12.7 10.3
Fuel/Transport 15.3 13.0 13.1
Stock Replacement 28.0 31.8 31.9
Raw Materials 17.2 13.6 16.9
Other 2.2 2.6 0.9
Not Stated 0.0 0.0 0.0
Expected Increase in Operating
Expenses
Respondents indicated that they expect the
largest increase in production costs over the
next 12 months to emanate from stock
replacement. Higher costs for utilities were
expected to be the second largest contributor to
production costs over the next 12 months (see
Table 3).