Local Business Confidence Slips in May

• Results from the Bank of Jamaica's (BOJ’s) May 2026 Survey of Businesses’ Inflation Expectations point to continued caution among businesses as they navigate the lingering effects of Hurricane Melissa, geopolitical uncertainty stemming from the Iran-US conflict, and a domestic monetary policy environment that has remained unchanged since the BOJ's February 2026 rate cut.
• Consistent with this cautious outlook, the share of respondents who expect the Central Bank to keep rates on hold over the next three months rose to 48.4%, up from 47.6% in April, while 25.5% of respondents expect rates to be marginally higher, up from 24.3%.
• Business sentiment weakened during the survey period, with the Present Business Conditions Index declining to 60.1 from 69.2 in the previous survey. The deterioration reflected an increase in the proportion of respondents who viewed current business conditions as "worse" than they were a year ago, suggesting that some sectors continue to face challenges stemming from post-hurricane recovery efforts and broader economic uncertainty.
• Expectations for future business activity also softened, as the Future Business Conditions Index fell to 113.4 from 114.6 previously. Although respondents still anticipate an improvement in conditions over the next year, the lower reading suggests reduced optimism regarding the pace of economic recovery and business expansion.
• Businesses also continue to anticipate rising inventory-related expenses. Stock replacement led expectations for operating cost increases, with 32.8% of respondents identifying it as the input most likely to experience the largest price increase over the next 12 months. This suggests that businesses remain concerned about inventory replenishment costs and supply-side constraints, potentially reflecting disruptions to global trade and shipping routes arising from the U.S.-Iran conflict and the blockage of the Strait of Hormuz during the survey period.
• Utility costs and fuel & transport expenses were also identified as major sources of future cost increases. Notably, the proportion of respondents expecting the largest increase to come from fuel and transport rose to 24.2% in May from 18.3% in April, suggesting a growing concern about global fuel and oil prices. The increase likely reflected expectations of rising domestic energy costs after Petrojam's decision in April to pass higher international oil prices onto consumers, which would affect transportation expenses.
• Finally, wage pressures showed signs of re-emerging, with 8.0% of respondents identifying wages and salaries as the input expected to increase at a higher rate over the next 12 months. The increase points to higher labour cost expectations as businesses gradually rebuild capacity and adjust to evolving economic conditions.

(Sources: BOJ & NCBCM Research)