Consumer demand pushes
Jamaican imports up 25 percent.

Lower inflation and exchange stability improve consumers' confidence and their taste for luxury imports

by Dennis Richards
Business News Network, Jamaica

With Jamaica's monthly inflation figures stabilizing, stronger consumer confidence has improved the country's taste for luxury imported goods. In the first half of this year, consumer goods accounted for more than a quarter of all imports. And, as the import bill keeps rising, the figures for the first half of 1996 show the value of imports are likely to clip the figure for the same period in 1994. For the period January - May 1996, importation of Consumer Goods was US$299 million or 26 percent of total imports. This is 25 percent above the record US$238 million consumer goods import bill set last year. The explosion in consumer goods imports started five years ago. In 1991, such imports for the entire year was US$ 252 million - that is US$47 million lower than the total for just the first five months of this year.

The monthly average consumer goods import for the year so far stands at US$59.8 million. If this continues for the rest of the year the full-year total would be at least US$718 million. This means that between 1991 and 1996, the value of consumer goods imported into Jamaica would have grown by 185%. The chief reason for the mushrooming of imported consumer goods is the motor car, and because of the attractive price, imported used vehicles have been a particular favorite. In 1991, only US$30.3 million was spent to import cars for consumers. Last year, US$138 million was spent. So far this year, the import bill for motor cars stands at US$57.2 million, matching last year's pace to reach US$137 million by year end.

Although this is a 35.7% increase in only five years, the rate of increase has slowed and there is still a chance that vehicle imports may not surpass last year's figures. The US$138 million worth of motor cars imported last year reflects a massive US$16.4 million and US$18 million tab for August and September 1995, respectively. In other words, barring any repeat of this kind of record-setting level of imports, there can be a decline in motor vehicle imports this year. The same could also be said of another category of consumer goods imports- durable goods. Durable goods imported to the end of May stood at US$38.9 million or an average annual rate of US$193.6 million. This is just 1 percent off the US$98.5 million imported last year.

For food and beverages, however, total imports were US$87.3 million at the end of May- this is up 9 percent over last year's figures. This is being viewed by the authorities as a problem, as this category is the second largest component of consumer goods, accounting for 29 percent of the total. This means the impact on the overall category will be more pronounced than if a less important component had shown such a high increase.
Jamaica's inflation in July of this year was only 0.75 percent -well below the 1.7 recorded in July 1995, but still ahead of the 0.37 percent inflation recorded in June 1996. Still, this translated into price increases of 11.69 percent between January and July; as these lower rates were not enough to offer the high rates set at the start of the year. As a comparison, in the first half of 1994, inflation was recorded at only 8.76 percent. If the monthly inflation rate stays below 1 percent for the rest of the year, the country may experience its lowest annual inflation in at least six years. The recent stability of the exchange rate and the price reductions that followed the revaluation of the Jamaican dollar since January, should help to ensure this. The government's insistence on granting relatively low salary increases is another factor which may halt inflation pressures.

The issue of seasonality, normally a negative factor doesn't seem to be rearing its head. For example, normally in July of each year there would be a substantial rise in the rate of inflation in the "Food & Drink" expenditure category, arising from seasonal increases in the price of fruits, vegetables and starch foods, such as yam and potatoes. This year, the rate actually slumped compared with inflation in the previous months. This of course reflects deflation in meat, fish and poultry prices.

Jamaica's exports at the end of May this year totalled US$604.7 million. Last year's figure was essentially the same at US$604.8 million. Of the US$604.7 million exported, US$426.4 million came from traditional sources such as bauxite and sugar. The remainder came from the newly emerging non-traditional sector which includes products such as textiles and apparel. Of course, mining dominated the category, accounting for US$284.7 million of the US$426.4 million in traditional exports. Non-traditional, on the other hand, recorded a very regrettable 18.5 percent decline over the US$219 million exported last year.

Food exports held their own with a 7 percent increase while the Beverages & Tobacco category gave an anemic performance; contracting 21 percent to US$6.8 million from US$8.6 million at the end of May last year.
The figures for the apparel sector were surprising, usually a perennial high-flyer, it caused most of the contraction in the textile sector. Clothing exports plunged by US$8.5 million from US$116.6 million last year to US$108.1 million this year; this was a 7 percent decline.

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