The Statistical Institute of Jamaica (STATIN) is reporting that the Jamaican economy recorded a mild decline in the second quarter of this year, a big improvement over the decline suffered in the first quarter and down on the estimates put out by Bank of Jamaica and the Planning Institute of Jamaica earlier.

Total value added at constant prices for the Jamaican economy declined by 0.1 per cent in the second quarter of 2013 when compared to the similar quarter of 2012. This resulted from a 0.6 per cent decrease in output of the Goods Producing industries as the Services industries remained relatively unchanged. Total value added at constant prices for the Jamaican economy declined by 1.3 per cent in the first quarter of 2013 when compared to the similar quarter of 2012.

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Within the Goods Producing Industries, the 9.4 per cent increase in the output of Mining & Quarrying and 1.9 per cent increase in Construction output were not sufficient to offset the decline in Agriculture, Forestry & Fishery of 6.6 per cent and Manufacture of 0.1 per cent.

Within the Services industries, increased output was recorded for Hotels & Restaurants (0.6 per cent), Finance & Insurance Services (0.7 per cent) and Real Estate, Renting & Business Activities (0.2 per cent). Industries that experienced lower levels of output were: Electricity & Water Supply (-2.0 per cent); while Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment, Transport, Storage & Communication and Producers of Government Services all declined by 0.2 per cent. However, Other Services remained relatively unchanged during the period.

When compared with the first quarter of 2013 the economy improved by 1.5 per cent. Both the Goods Producing and Services industries recorded higher levels of output. The Goods Producing industries increased by 1.7 per cent while the Services industries increased by 1.5 per cent.

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Economic activity for the June 2013 quarter is estimated to have declined within the range of negative 0.8 percent to positive growth of 0.2 percent the central bank said in its latest report on the economy. This performance compares to average decline of 0.7 per cent for the four preceding quarters.

The weak performance of the economy continued to reflect low external and domestic demand. Low domestic demand reflected the impact of depressed real wages and high unemployment the central bank said. The data compares with a decline of 1.3 percent that the Statistical Institute of Jamaica said occurred in the March quarter and an estimated decline within the range of -1.2 per cent and -0.2 per cent by BOJ.

The preliminary out turn compares with the central bank’s forecast for the quarter of real GDP growth within the range of -0.5 per cent to 0.5 per cent for the June 2013 quarter.  This performance it then said should reflect expansions in Mining & Quarrying and Construction offset by contractions in Hotels & Restaurants and Agriculture, Forestry & Fishing.

The central bank outlined the various areas of growth or contraction. For the review period, contractions are estimated for the tradable and non-tradable industries. The performance of tradable industries primarily reflected declines in Export Agriculture, Manufacturing and Hotels & Restaurants. Electricity & Water Supplies and Domestic Agriculture drove the contraction in the non-tradable industries.

Agriculture, Forestry & Fishing is assessed to have contracted further in the June 2013 quarter, relative to average quarterly decline of decline of 2.1 per cent for the preceding four quarters. The decline in the industry was largely associated with unfavourable weather conditions, weak global demand and the continued impact of the coffee rust disease. Specifically, the outturn for the review quarter reflected contractions of 5.7 per cent and 41.0 per cent in domestic and export crop production, respectively. This compares to an expansion of 12.7 per cent in domestic crop production and a decline of 20.4 per cent in export crop production in the June 2012 quarter. The estimated decline in export crop production largely reflected a contraction of 41.3 per cent in sugar cane milled relative to a decrease of 20.4 per cent in the corresponding quarter of 2012. The fallout in sugar cane milled reflected the earlier commencement of the crop year relative to the corresponding period in 2012.

For the review quarter, Hotels & Restaurants is estimated to have contracted marginally relative to growth of 4.7 per cent in the June 2012 quarter. Of note, the industry’s performance was reflective of estimated declines in both sub-industries. The fall in Hotels was inferred from declines of 0.2 per cent and 0.4 per cent in stop-over visitor arrivals and visitor expenditure, respectively, relative to the corresponding quarter in 2012.

With the exception of the March and December 2011 quarters, Electricity & Water Supply is assessed to have contracted since the March 2010 quarter. The performance of the industry in the June 2013 quarter reflected decreases of 2.3 per cent and 0.1 per cent in electricity consumption and water production, respectively. Lower electricity consumption was primarily influenced by disruptions in transmission due to technical losses and theft. Continued drought condition hampered water production during the review period.

Following five consecutive quarters of growth averaging 0.7 per cent, output for Finance & Insurance Services is estimated to have contracted in the June 2013 quarter. The downturn was largely institutions’ participation in the National Debt Exchange in February 2013.

Mining & Quarrying is estimated to have recorded growth in contrast to the contraction of 9.7 per cent in the June 2012 quarter. The improvement in the industry was primarily reflective of increased capacity utilization of 40.6 per cent in the alumina industry relative to 37.4 per cent in the June 2012 quarter. This improvement reflected normalization at one alumina plant that had encountered technical difficulties in the corresponding period of 2012. Against this background, total alumina production increased by 8.6 per cent. However, due to maintenance activity at the bauxite plant, crude bauxite production declined by 4.4 per cent. In this context, total bauxite production grew by 2.2 per cent during the period.

For the June 2013 quarter, marginal growth is assessed within Construction compared to a contraction of 4.2 per cent in the preceding June quarter. The performance of the industry mainly reflected the impact of infrastructural development programmes and hotel projects such as Highway 2000, Riu Palace Jamaica and Memories White Sand Resort.

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A $1.5 cut in interest payment, a $2 billion reduction in capital spend and $1 billion saved on programs was more than enough to wipe out a reduction in revenues of $2.4 billion due to a number of factors in June this year.

Some $440 million in the revenue shortfall came from increased payment of withholding tax refunds on interest. Tax on dividends may have been over estimated on the assumption that the payment pattern would have remained. Instead many companies brought forth payments to March thus beating the taxation for a part of the annual payment.

Telephone tax was way down no doubt a result of lower calling rates. Overall international trade delivered as planned but a few fell somewhat short. Local GCT was 15 percent up or around $500 million over forecast and was up 6 percent above the amount collected in June last year, while SCT fell short by $700 million against 2013/4 budget but this may be due to a shift between May and June as the May target was over achieved and may have shifted some of the inflows to that month which enjoyed $900 million more inflows than planned. Company profit tax fell $500 million short of plan.

Due to the savings on the expenditure side and overachievement in the first two months, the fiscal deficit to date is running well ahead of plan by $4.8 billion, resulting in the deficit coming in at $5.4 billion. The deficit for May was just $1.63 billion against projection of $3.7 billion. The target for July is for a deficit of $1.7 billion, but August is a huge $10.8 billion.

Compared to 2012 revenues, this year is running well ahead of the quarter to June last year by 13.5 percent and 16.5 percent in the month of June versus June last year. In the past, the challenges start to occur in July and onwards when revenues starts to fall off from target. The sharp slowdown in cigarettes sales reported by Carreras could negatively affect special consumption tax revenues going forward for a while at least.