Stocks cast doubt on 2012 confidence surge

Business and consumer confidence levels, hit the roof in the latest surveys conducted between February and March of 2012. But the actions of investors on the local stock market suggest that they do not buy into the surge or the main reasons for the optimism.
Based on the data, business confidence levels are at a near all-time high with the change in the latest indices showing an all-time jump of 29 percent reaching 123.70 but still below the all-time high of 134.2 in the 2007 September quarter. Consumer confidence in the review period leaped an astounding 54 percent to reach 160.1, all this after a new political party was installed in power with slim popular majority support at the polls in December last year.
The numbers grew in 2007 with consumer confidence rising by 12 percent for an all-time
high then of 154.9 in the June 2007 quarter, shortly before the general election of that year. There were no surveys done in the December quarter last year.
Jeep Boost Confidence Interestingly, a great deal of the boost in confidence hinges on the expectation of a programme that is yet to show any major signs of delivering meaningful fruit, that is the JEEP employment initiative. The only problem is that smart money is not buying it, at least not now.
The confidence levels and the stock market tend to move closely together as indicated by the graph, which plots the percentage changes in both the business survey and the All Jamaica stock market index. There are two periods—late 2002 to mid-2004 and again since March last year—when the two deviated widely. The stock market is not buying the increase in confidence. The market, which trades daily, more quickly reflects the major changes in economic development than either the consumer or business surveys that are conducted quarterly.
Firms Gets Boost Too “The change in government policies did cause firms to anticipate much more favorable economic conditions and expected their firm to benefit from added demand. Firms, unlike consumers, had already noticed some strengthening in the Jamaican
economy in early 2012. Jamaica’s main trading partners still face challenges, although the U.S. economy is expected to continue to improve during 2012. Overall, the data point toward an improving economy with the financial condition of firms strengthening and a cautious expansion of investments”, the survey indicated.
Hope For Benefits “When Jamaicans were asked to describe in their own words why they viewed conditions more favorably, more than half mentioned the new government and the new jobs programme. When specifically asked about future jobs prospects, 57 percent expected jobs to be more plentiful, twice the 23 percent recorded in last year’s 1st quarter survey. This was the highest proportion to hold favorable
job expectations, eclipsing the 42 percent recorded after the 2007 election. Just 19 percent expected jobs to be harder to get during the year ahead, well below the 50 percent plus levels recorded in every survey during the past three years.”
As it pertained to the strengthening of the economy, just 10 percent of Jamaicans
were of the view that the economy improved during the past year, while 47 percent
expected economic gains during the current year. This was the most favorable
outlook for the economy ever recorded, predicated on the new government.
Examination of the data historically indicates that consumer confidence levels
are the least reliable of the two surveys.