People shopping in the plazas, Constant Spring Road, last year Christmas. The Bank of Jamaica predicts lower consumer spending this year, compared to last year. - File
THE BANK of Jamaica (BOJ) is predicting that spending by consumers this coming Christmas season is likely to be less in real terms than the amount of money expended in 2007.
Short-term indicators of consumption (GCT returns and currency in circulation) point to an appreciable softening in spending since the beginning of 2008, the central bank states. "We expect the customary pick-up in consumption for the Yuletide season," a BOJ official told The Sunday Gleaner on Friday. He pointed out that spending on goods and services in Christmas 2008 should be less than last Christmas given the erosion in real incomes, occasioned by the higher rates of inflation in the first three quarters of 2008.
The source adds that the recent trends in international commodity prices and dampening in domestic inflation would encourage consumption, but given the general uncertainty about the economy, consumer spending could be restrained.
higher prices
Meanwhile, local supermarket chains point out that consumers will be faced with prices which are higher than they were in December 2008.
Windsor Malcolm, marketing officer of Super Plus Food Stores, says that prices in the stores are up for the season as several increases were announced by suppliers in 2008. New increases were also implemented in November.
"Items purchased at this time (Christmas) normally go up from our suppliers. We have to increase our prices as well," said Malcolm.
spending on construction falls
"Households have also adjusted their spending patterns on food, petrol and some recreational activities," the central bank states. "Home improvement is also likely to see less activity." The bank indicates that construction is one area in which spending has fallen. "Leading indicators of construction suggest that spending in this sector is down for the first half of 2008."
Between November 2007 and November 2008, the 12-month inflation rate has been estimated by the central bank to be approximately 20.0 per cent, down from approximately 24 per cent in October 2008.
The bank states that the inflationary pressures have slowed considerably since August of this year with a significant deceleration in the monthly rate of inflation since August 2008.
It was expected, the bank said, that prices in general, would remain stable until yesterday, with the strong likelihood of some declines.
In the stores, retailers have recognised that shoppers have been cutting back all year long and may continue this new habit into the Christmas season.
Cornetta Reynolds, an assistant store manager for the Shoppers Fair chain said: "Consumers are more price sensitive than before. They are watching every cent they spend. They are looking closely, not just at quality.
"There are some who purchase certain brands and remain loyal. But since recently, what we have noticed is that persons are moving away from this and looking closely at prices. Prices are the most important factor.
"They are also looking for substitutes," she says, adding that she does not expect a buoyant Christmas.