It used to be popular sport in Jamaica to, from mid-December, track the cash in circulation as proxy for the kind of spending people were doing in the lead-up to Christmas. The climax is usually December 24, Christmas Eve, when the money in circulation would peak and shopping would be at its most frenzied.
The sport is still on, but not followed, at least not this year, with the intensity of the past. Which, in a way, makes obvious sense, being, some will suggest, in concert with the statistics and reflecting the mood of the country.
The Bank of Jamaica (BOJ), the referee in the sport, has just released the data on cash in circulation up to December 24. It peaked, the central bank said, at $54.4 billion or 4.9 per cent higher than at the corresponding period in 2008.
The BOJ had projected a growth of 8.5 per cent, or nearly double the amount of cash that Jamaicans demanded this Christmas. This statistic, however, does not, by itself, give the full picture of how Jamaicans contained the urge for the usual Christmas-time splurge, for the cash they spent would have bought less a year ago.
Inflation
Indeed, for the calendar year up to end of October, inflation, as measured by the consumer price index, was 8.1 per cent. On a point-to-point basis, between last December and November, the hike would be around nine per cent, or nearly double the rate of the rise of the cash in circulation up to December.
In some respects, that Jamaicans did not go out on a spending binge is understandable and would have been welcome by the administration. After all, Prime Minister Bruce Golding, in the face of the economic crisis, has been urging restraint, in an environment where there was already deep uncertainty.
In the days leading up to Christmas, the Government announced a $21.8-billion budget, including a proposal to expand the range of products on which the general consumption tax (GCT) would be imposed and hiked the rate of the GCT one percentage point to 17.5 per cent. A revision of that tax package, withdrawing the additional goods and services that were to be subject to GCT, but aimed at raising the same amount of cash, was unveiled by Prime Minister Golding only a day before the biggest shopping day of the year.
Government expenditure
The psychology of restraint was already in place, and will likely deepen in a circumstance where a cut in government expenditure, including a cut in public-sector jobs, is almost inevitable, as part of the conditions for a US$1.2 billion loan from the International Monetary Fund. That is quite understandable.
In this circumstance, and given the mood that consumers displayed at Christmas, the Jamaican economy is in for a rough ride and the decline in the gross domestic product this fiscal year could be deeper than the four per cent that has been projected.
It is important, therefore, that in this environment of gloom the administration unveil its broader economic programme, beyond the measures that merely point to contraction. There must be a clear path out of the gloom.
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