SURVEY OF BUSINESSES’ INFLATION
EXPECTATIONS
MAY 2017
RESEARCH SERVICES DEPARTMENT
RESEARCH AND ECONOMIC PROGRAMMING DIVISION
Inflation Expectations 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 29 April and 19 May 2017 and had 313 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?
Actual Pt to Pt (Headline) CY Forecast
Annual Point to Point Per Cent
6.0
4.0
4.6
4.5
The May 2017 survey indicated an
expected inflation of 2.0 per cent for
calendar year (CY) 2017, which was just
below the 2.3 per cent recorded for the
previous survey. The expected inflation
12 months ahead moderated slightly
relative to the previous survey.

The perception of inflation control
improved marginally in the May 2017
survey relative to the previous survey.

Respondents increased their expectations
about the pace of depreciation over all
three time horizons.

The majority of respondents believed that
the Bank’s OMO rate will remain the
same over the next three months.

Both the Index of Present Business
Conditions and the Index of Future
Business Conditions improved. Both
indices remained on an upward trend
when compared to CY2014.
4.9
4.1
3.6
3.0
2.0

CY Expectation
5.3
5.0
Overview
2.3
2.0
2.0
1.0
0.0
Feb-17
Mar-17
May-17
Figure 2: Expected Annual Inflation
Based on the last 12 months (April 2016 to March
2017) the average monthly inflation rate was
approximately 0.3 per cent. What do you think the
average monthly rate will be for the next 12 months?
18.0
Actual
Expected
16.0
14.0
12.0
(%)
10.0
8.0
6.0
4.0
2.0
0.0
Note: (i) The responses have been annualized (ii)
the expected inflation for May 2018 reflects
responses as at May 2017 (iii) periods where no
survey was conducted assume the previous month’s
expectation.
Prepared by the Research Services Department
May 2017 Survey
Inflation Expectations
In the May 2017 survey, the expected inflation
for CY2017 was 2.0 per cent, which was just
below the 2.3 per cent recorded for the
previous survey. This expectation was also
below the actual annual point-to-point inflation
of 4.6 per cent for May 2017 (see Figure 1).
Respondents’ expectation of inflation 12
months ahead moderated slightly to 4.0 per
cent from the 4.1 per cent recorded in the
previous survey. (see Figure 2).
Page 1
Inflation Expectations Survey
Figure 3: Perception of Inflation Control
How satisfied are you with the way inflation is being
controlled by the Government?1
8.4
8.4
300
19.7
15.4 2.6
19.9
13.7 4.6
4.0
6.0
20.8
4.8
Very Dissatisfied
350
200
Index
43.3
40.4
36.8
44.8
37.7
43.9
42.3
36.3
40.3
28.3
.
37.9
250
31.9
25.6
31.3
29.5
40%
28.2
50%
24.2
25.7 6.0
3.7
8.1
21.4
27.0
25.2
29.4
30.3
29.5
35.6
Dissatisfied
60%
29.5
percent
24.4
80%
70%
9.4
13.8
11.0
11.7
11.5
14.6
90%
Neither
18.2
Satisfied
23.5 5.8
Very Satisfied
100%
150
30.6
28.0
41.4
41.8
100
25.2
32.5
33.1
23.5
30.2
28.8
30.1
29.4
27.2
27.9
24.4
10%
21.5
20%
28.9
30%
50
0%
0
*December 2005 = 100
Table 1: Exchange Rate Expectations
In March 2017 the exchange rate was
J$128.40=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
Expected Depreciation
Periods
Ahead
Dec-16
Feb-17
Mar-17
May-17
3 Months
1.0
0.4
1.0
1.1
6 Months
1.8
0.8
1.4
1.6
12 Months
2.7
1.5
2.2
2.6
In March 2017 the 180-day T-bill rate was 6.3 per
cent. What do you think the rate will be for the next
three months?
Exp(All)
Exp Intrate(Fin)
% Response ( Actual & Exp Intrate)
10
9
8
7
6.1
6.4
6.5
6.3
Exchange Rate Expectations
Relative to the previous survey, respondents
adjusted upward their outlook for the pace of
currency depreciation over all time horizons.
Specifically, in the May 2017 survey, the
exchange rate was expected to depreciate by 1.1
per cent for the 3-month horizon which was
slightly higher than the 1.0 per cent expected
in the March 2017 survey. For the 6-month and
12-month horizons respondents expected
depreciations of 1.6 per cent and 2.6 per cent,
respectively, compared to depreciations of 1.4
per cent and 2.2 per cent in the March 2017
survey (see Table 1).
Interest Rate Expectations: 180day T-bill
Figure 4: 180-day T-bill
Actual Int.rate (6mth T-bill)
Businesses’ perception of the Bank’s control of
inflation improved in the May 2017 survey.
Specifically, the index of inflation control grew
to 270.4 in the current survey from 267.8 in the
previous survey (see Figure 3). This was largely
due to an increase in the proportion of
respondents who were “satisfied” and a small
decrease in the proportion that were
“dissatisfied”.
6.4
6.4
6.3
6.5
6.4
6
5
4
3
2
1
Survey respondents expected the 180-day
Treasury bill rate, three months hence, to be 6.5
per cent on average, an increase relative to the
6.4 per cent in the previous survey. This
expected rate is above the actual outturn of 6.1
per cent for May 2017 (see Figure 4). Financial
sector respondents expected the 180-day
Treasury bill rate, three months hence, to be 6.4
per cent.
0
Feb 2017
Mar 2017
May 2017
1
Index of inflation control calculated as the number of satisfied
respondents minus the number of dissatisfied respondents plus
100
Prepared by the Research Services Department
May 2017 Survey
Page 2
Inflation Expectations Survey
Table 2: Interest Rate Expectations: OMO
Rate
In March 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 three months?
OVERALL
SURVEY DATES
Feb-17
FIN SECTOR
Mar-17
May-17
Feb-17
Mar-17
May-17
Survey responses (percentage of total)
Significantly Lower
0.0
0.6
0.3
0.0
0.0
1.4
Marginally Lower
16.7
15.8
17.5
15.7
14.5
15.5
Remain the Same
61.4
56.8
57.6
57.1
50.7
50.7
Marginally Higher
19.9
26.4
23.2
27.1
34.8
29.6
Significantly Higher
1.0
0.3
0.6
0.0
0.0
2.8
Don’t Know
1.0
0.0
0.6
0.0
0.0
0.0
205.2
212.5
213.2
186.8
211.7
204.4
217.0
158.4
166.5
102.5
121.1
110.2
123.6
155.0
164.9
162.6
161.5
166.9
100
50
*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?
157.9
161.1
175.7
164.4
169.1
186.4
171.5
167.1
145.7
158.2
135.2
150.7
150
117.9
129.9
200
142.4
146.0
157.0
152.2
250
Index of Future Business Conditions
In the May 2017 survey, both the Present
Business Conditions Index and the Future
Business Conditions Index increased relative to
the previous survey (see Figures 5 and 6). The
Present Business Conditions index rose to
212.5 from 205.2 in the previous survey. The
index of the Future Business Conditions
increased to 161.1 from 157.9 attained in the
previous survey.
0
May-17
Mar-17
Feb-17
Dec-16
Oct-16
Sep-16
Aug-16
Jun-16
May-16
Apr-16
Feb-16
Dec-15
Oct-15
Sep-15
Aug-15
Jul-15
May-15
Apr-15
Feb-15
Dec-14
Oct-14
Sep-14
Aug-14
Jun-14
May-14
Index of Present Business Conditions
150
190.4
In general, do you think business conditions are
better or worse than they were a year ago in
Jamaica?
200
In the May 2017 survey, the majority of
respondents expected that the Bank’s OMO rate
would remain the same over the next three
months. Furthermore, this proportion increased
relative to the previous survey. There was a
decrease in the proportion of respondents that
expected the OMO rate to be “marginally
higher” and a corresponding increase in the
view that the rate will be “marginally lower”.
This was also evident for the responses from the
financial sector.
Perception of Present and Future
Business Conditions
Figure 5: Present Business Conditions
250
Interest Rate Expectations: OMO
Rate
100
50
The increase in both indices reflected a rise in
the number of respondents of the view that
conditions are or will be “better”. Additionally,
there was a marginal decrease in the number of
respondents who believed present-day
conditions were worse. The increase in the
“better” view about the future, however, was
partly offset by a marginal increase in the
proportion of firms of the view that conditions
would be “worse”.
As reflected in Figure 5 and 6, both indices
remained on an upward trend when compared
to CY2014.
0
May-17
Mar-17
Feb-17
Dec-16
Oct-16
Sep-16
Aug-16
Jun-16
May-16
Apr-16
Feb-16
Dec-15
Oct-15
Sep-15
Aug-15
Jul-15
May-15
Apr-15
Feb-15
Dec-14
Oct-14
Sep-14
Aug-14
Jun-14
May-14
*December 2005 = 100
Prepared by the Research Services Department
May 2017 Survey
Page 3
Inflation Expectations Survey
Table 3: Operating Expenses
Which input do you think will have the highest
price increase in the next 12 months?
Feb-17
Mar-17
May-17
Utilities
30.4
29.5
29.0
Wages/Salaries
13.1
8.7
8.3
Fuel/Transport
11.4
20.8
15.3
Stock Replacement
27.1
25.5
28.0
Raw Materials
16.0
13.7
17.2
Other
2.0
1.9
2.2
Not Stated
0.0
0.0
0.0
Prepared by the Research Services Department
May 2017 Survey
Expected Increase in Operating
Expenses
Similar to the previous survey, respondents
indicated that they expect the largest increase in
production costs over the next 12 months to
emanate from Utilities. Higher costs for Stock
Replacement were expected to be the second
largest contributor to production costs over the
next 12 months (see Table 3). Furthermore,
there was a noticeable increase in the
respondents indicating Raw Materials while
there was a reduction in the proportion of
respondents
specifying
Fuel/Transport.
Wages/Salaries was the input cost least
expected to increase over the next 12 months.
Page 4