consumer sentiment 2015 q1 barbados

Consumer Sentiment 2015 Q1 Summary Consumer confidence is a unique gauge of economic activity. It is the measurement of what individuals and households think is going to happen in the future. Therefore, consumer confidence reports are one of the few forward looking data sets available to members of the public which are also of importance to business owners and executives within the wider business community.

Consumer confidence reports therefore represent an important source of information for businesses, consumer advocates, researchers and policy makers. Because of the uncertainty involved it is strongly recommended that a variety of information sources be utilized by both the business community and policy makers for more effective decision-making.

ABELIAN Consulting Services, in collaboration with the Barbados Today has set about trying to understand consumer confidence levels over time and have developed this series of surveys. The objective is to assess what households are experiencing and to communicate these in a manner that lead to better policy making. There reports will also assist the local business community in their forward planning and decision-making by having greater access to timely LOCAL data and information. Businesses therefore do not have to rely exclusively on the release of national data for information of this nature.

This is the first instalment of the Consumer Sentiment for Barbados and we wish to sincerely thank the team at Barbados Today for facilitating the survey.

We wish to especially thank the many individuals that took the time out of their busy schedules to participate in the survey and answering the questions.

Conducted by ABELIAN Consulting Services

in collaboration with Barbados Today

Barbados

June 01, 2015

Consumer Sentiment 2015 Q1 - Barbados

SURVEY METHODOLOGY

The Consumer Sentiment survey was designed and executed to capture consumer responses in Barbados.

The survey questions were designed by the team at ABELIAN and have taken feedback from other source including participants. The survey would allow for benchmarking confidence levels among consumers in Barbados against other countries over a period of time.

Opening on March 05, 2015 and closing on Monday April 20, 2015, the survey was distributed exclusively online via email and social media by ABELIAN and the website of Barbados Today to a wider cross section of the consumers in Barbados.

The questions were short and simple and took on average approximately 7 minutes to complete for most respondents.

The privacy of all respondents are fully maintained as responses are anonymous and this shall be maintained at all times.

Although the survey is qualitative in nature, the reported statistic for each question is a single net balance number where applicable. That is, for each question the respondent is asked to indicate “improved” or “increased”, “deteriorated” or “decreased”, or “remained the same”. Respondents are expected to extrapolate from their own experience driven by internal performance data when answering the

questions in the surveys whilst also taking into consideration any relevant issues currently affecting their industry and/or sector. The responses are then converted into a net balance statistic via the calculation:

𝑛𝑛𝑛𝑛𝑛𝑛 𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑏𝑛𝑛𝑏𝑏𝑛𝑛 (%) = �(𝑖𝑖 − 𝑑𝑑)

(𝑖𝑖 + 𝑑𝑑 + 𝑟𝑟𝑛𝑛𝑟𝑟)� ∗ 100

Where 𝑖𝑖 is the number of “improved” responses; 𝑑𝑑 is the number of “deteriorated” responses; and 𝑟𝑟𝑛𝑛𝑟𝑟 is the number of “remain the same” responses;

FIGURE 1: CONFIDENCE RANGE

Figure 1 shows the range of the net balance statistic which has a minimum of -100 (0 improved and remained the same responses) and a maximum of +100 (0 deteriorated and remained the same responses).

Research shows a strong positive correlation between consumer confidence and economic growth. Countries with consistent metrics on the greener end of the confidence spectrum tend to have stronger economic performance which is underpinned by the robust consumer and business activity.

Very low Low Balanced Moderate High-20 +20 +60 +100-100 -60

www.abelianconsulting.com of 13

http://www.abelianconsulting.com/


Consumer Analytics The majority of respondents to this survey were urban Barbados which is consistent with population patterns. However, nearly 30% were from Christ Church and just over 20% from St. Michael with St. James following closely with 15%.

Parish Responses Percent Christ Church 88 29% St. Andrew 2 1% St. George 21 7% St. James 44 15% St. John 3 1% St. Joseph 4 1% St. Lucy 10 3% St. Michael 62 21% St. Peter 10 3% St. Philip 42 14% St. Thomas 15 5% TOTAL 301 100% Skipped 31

40% of respondents indicated having total household annual income of less than $50,000.

Nearly 2 out of every 3 respondents (62%) were employed for wages of which 20.6% earned $25,000-$49,000 and 17.9% earned $50,000-$74,999.

Majority of respondent (62%) were employed for wages, followed by those self-employed at 16%.

NUMBER OF RESPONDENTS

There were 332 responses to the Consumer Sentiment survey for 2015 Q1.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

$100,000 or more

$75,000 - $99,999

$50,000 - $74,999

$25,000 - $49,999

Less than $25,000

20%

12%

28%

25%

15%

26. Please indicate your total household annual income.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Unable to work

Self-employed

Security forces (Military, Police, etc.)

Retired

Out of work but not currently looking for work

Out of work and looking for work

Employed for wages

A student

A homemaker

1%

16%

1%

5%

1%

8%

62%

6%

1%

24. Please indicate your current employment status.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

17 or younger

18 - 24

25 - 34

35 - 44

45 - 54

55 or older

2%

4%

25%

30%

24%

16%

22. What is your age group?




Household Financial Situation

49% of respondents generally felt the financial situation of their household deteriorated in the first quarter of 2015 compared to the last quarter of 2014.

Of these 15% earned less than $25,000 annually, 13% earned $25,000-$49,999 annually and 10% earned $50,000-$74,999 annually. 43% indicated an unchanged financial position for their households. This generated a LOW net balance statistic of -40% which indicate low consumer confidence.

On the brighter side, 51% of respondents indicated their household financial situation has either remained unchanged or had in fact improved. The distribution of incomes within this cohort was much more even.

When asked to compare the same quarter one year earlier, nearly two-thirds (64%) indicated the financial situation of their households had deteriorated. Approximately 36% of these persons earn less than $50,000 annually. 25% of these household had 1 or 2 children under 17 residing therein.

Almost one quarter of these persons also indicated an expectation that their household financial situation will deteriorate over the next 12 months, slightly higher than those that expected their situation to improve over the same period.

The net balance was estimated as being LOW at -52%, showing lower confidence for this metric.

Overall, the financial situation of household appear delicately poised as demonstrated by the two confidence measures above.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Improved a lot

Improved somewhat

Unchanged

Deteriorated somewhat

Deteriorated a lot

0%

8%

43%

38%

11%

1. How has the financial situation of your household changed in the current quarter compared to a quarter

earlier?

Net balance (%): -40%Confidence: LOW

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Improved a lot

Improved somewhat

Unchanged

Deteriorated somewhat

Deteriorated a lot

2%

11%

23%

47%

18%

2. How has the financial situation of your household changed in the current quarter compared to the same

quarter a year earlier?





Looking forward consumer sentiment appears more positive. More persons have greater expectations for their financial positions in 12 months’ time than in the shorter term.

Whilst 55% don’t expect their financial position to change in the next 3 months, this percentage declines to 42% when asked about the next 6 months. If further declines to 29% when asked about their household financial situation in 12 months’ time.

This results in the net balance metrics for these 3 time period moving from negatively balanced for the next 3 months to positively balanced for both the 6 months and 12 months ahead time periods. More of the respondents that indicated an unchanged expectation to their financial situation for the next 3 months, appear to be more optimistic about their fortunes than those more pessimistic.

As can be seen in the charts, there were increases in respondents indicating both improvements and deteriorations in their expected financial position. This in itself is an indication of the weakness in consumer confidence among households in Barbados.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Will improve a lot

Will improve somewhat

Will not change

Will deteriorate somewhat

Will deteriorate a lot

1%

20%

55%

20%

4%

3. How do you expect your household’s financial situation to change in the next 3 months?

Net balance (%): -3%Confidence: NEGATIVELY BALANCED

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Will improve a lot

Will improve

Will not change

Will deteriorate


5%

26%

42%

24%

4%


Net balance (%): +3%Confidence: POSITIVELY BALANCED

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Will improve a lot

Will improve

Will not change

Will deteriorate


7%

34%

29%

23%

7%


Net balance (%): +11%Confidence: POSITIVELY BALANCED




Overall Economic Situation Respondents were not particularly optimistic about short term economic prospects in Barbados.

Expectations on economic performance in 2015 Q1 were LOW. Notwithstanding the seasonal element, 53% of consumers thought the economy deteriorated in the first quarter of 2015 when compared to the last quarter of 2014. Only 13% thought it would improve which points to a perception of a lack of momentum in current economic activity.

With respect to performance in the second quarter of 2015 consumer confidence was also measured as being LOW on the scale but more positive when compared to 2015 Q1. 44% of respondents thought the economic situation in the second quarter will deteriorate, and the same percentage also perceived economic activity in 2015 Q2 will remain the same when compared to 2015 Q1.

Respondents were also not very positive with their expectations for employment prospects in the economy as more than 50% expect the unemployment to increase over the next 6 months. Overall confidence for this indicator is LOW.

These labour market results appear consistent with the forward looking sentiment on the overall economic situation in the short term.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Will improve a lot


Will not change



1%

12%

34%

41%

12%

6. How do you think the overall economic situation in Barbados performed in the current quarter compared to

a quarter earlier?


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Will improve a lot


Will not change



0%

12%

44%

35%

9%

7. How do you expect the economic situation in Barbados to change in the next 3 months?


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Will decrease a lot

Will decrease somewhat

Will not change

Will increase somewhat

Will increase a lot

6%

18%

24%

37%

14%

13. How, do you think, unemployment will change in the next six months?





Prices Expectations

An overwhelming majority of respondents (70%) indicated that on average, their cost of living increased when compared to a quarter earlier. The net balance statistic for this indicator is LOW on the confidence range at -58%.

When asked to compare with the same quarter one year earlier (2014 Q1), 76% reported an increase in their average cost of living. As a result, the estimated confidence level for this indicator is VERY LOW at -62%. The overall price pressure on individuals and household appear quite evident from these results.

Of those that indicated that their average cost of living increased significantly or extremely, 81% earn annual incomes of less than $75,000. Those earning $25,000-$49,000 reportedly experienced the greatest impact of price increase over the past year.

Looking ahead consumer price expectations are not much brighter as some 82% expect prices to increase in the next quarter. A ray of sunshine is that more persons (22%) expect prices to increase at a lower rate than at a faster rate (17%) in the next quarter. Therefore the confidence metric for this indicator is rated VERY LOW at -80% as only 3% of respondents expect prices to decrease.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Decreased

Unchanged

Increased somewhat

Increased significantly

Increased extremely

12%

19%

40%

24%

5%

8. How has your average living cost changed in the current quarter compared to a quarter earlier?


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Decreased

Unchanged

Increased somewhat

Increased significantly

Increased extremely

14%

10%

35%

30%

11%

9. How has your average living cost changed in the current quarter compared to the same quarter a year earlier?

Net balance (%): -62%Confidence: VERY LOW

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Will not change

Will increase at lower rates

Will increase at the same rates

Will increase at faster rates

3%

15%

22%

43%

17%

10. How do you think prices will change in the next quarter?





Looking ahead one year, prices expectations are also very similar to the 3 months ahead. 92% of respondent expect prices to increase over the coming year. However, more persons (28%) expect prices to increases at a faster rate than at a lower rate (25%) whilst 39% expect prices to increase at the same rates.

When asked to quantify prices changes, half of respondents expect inflation to rise by between 2-4% over the next year. One quarter of respondents expect prices to rise by more than 4% in the next year.

Of the 51% of consumers who expect unemployment to increase over the next 6 months, 30% earn less than $50,000 annually. In addition, though employment prospects do not appear especially bright, only 16% of these respondents expect their household financial situation to worsen over the next 6 months.

The conclusion is that consumers by a margin of 2:1 expect inflation to be at least the same level over the next 12 months which if realized and with no significant changes in incomes or employment prospects could likely result in financial distress on more individuals and households.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


Will not change

Will increase at lower rates

Will increase at the same rates

Will increase at faster rates

4%

5%

25%

39%

28%

11. How do you think prices will change in the next year?


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

will fall

will not change

will rise 0 - 2%

will rise 2 - 4%

will rise more than 4%

4%

1%

20%

50%

25%

12. How much, do you think, prices will change in the next year?


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Will decrease a lot


Will not change

Will increase somewhat

Will increase a lot

6%

18%

24%

37%

14%

13. How, do you think, unemployment will change in the next six months?





Expenditure and Savings

There were 307 responses to these questions related to expenditure and savings with consumer attitudes appearing to be mixed this quarter.

Nearly two-thirds of respondents thought that now was not a good time to make large purchases. As to be expected of this 63%, 48% earning less than $75,000 annually. These sentiments generally reflect the price expectations as well as employment prospects in the economy at the moment. As a result, the level of confidence for this indicator was quite LOW at 59%.

With regard to actual expenditure it appears purchases of consumer durables and the like have been a lot less at both time period examined. Compared to the 2014 Q4, 54% bought less of these items which is almost identical to the level bought in 2014 Q1 which was 53%. This is an indication of the softness in economic activity and consistent with the prices expectations and other economic indicators. Both of these metrics also measure as being LOW on the confidence range.

The relative closeness of these two metrics in particular shows that economic recovery has not taken root as these are key indicators of consumer confidence which are precursors for economic growth.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Yes, now is the best time to make such purchases

Time does not matter for making such purchases

No, it is not a good time. Such purchases should be leftfor later

4%

34%

63%

14. Do you think now is the best time to make large purchases (such as furniture items, household appliances)?


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

A lot more

Somewhat more

More or less the same

Less

A lot less

5%

13%

28%

21%

33%

15. Compared to the past quarter, for large purchases (such as furniture items, household appliances), in the current

quarter you have spent:


0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

A lot more

Somewhat more

More or less the same

Less

A lot less

6%

12%

29%

23%

30%

16. Compared to the same quarter last year, for large purchases (such as furniture items, household appliances), in

the current quarter you have spent:





Expenditure and Savings

Despite the circumstances surrounding the financial situation of individuals and households and the overall economic situation, nearly two-thirds (63%) of respondents thought NOW was a good time to save. 30% didn’t share such positive sentiments regarding saving.

The confidence rating on this metric was MODERATE and the highest for this survey. This is somewhat surprising given the announcement of the Central Bank of Barbados that the minimum deposit rate on savings would be liberalized during the second quarter of 2015. This announcement made in early April did not appear to significantly influence the perception for savings.

On saving in the next quarter, consumer sentiment in this regard more reflected current financial situation of households as the overall rating was NEGATIVELY BALANCED for this indicator.

When asked to describe their current actual financial situation, a majority of households (57%) are able to cover their expenses without utilizing savings or borrowings. This is quite good given their low perception of economic activity. Not surprisingly, of the 43% either borrowing or using savings to cover expenses 25% earn less than $50,000 annually.

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

A very good time to save

A good time to save

Not sure

An unfavourable time to save

A very unfavourable time to save

32%

31%

7%

16%

14%

17. Taking into account the overall economic situation, do you think now is:

Net balance (%): +33%Confidence: MODERATE

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Highly possible

Possible

Not sure

Impossible

Totally impossible

3%

26%

35%

25%

12%

18. Do you think that, in the next quarter, saving would be:

Net balance (%): -8%Confidence: NEGATIVELY BALANCED

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

We are saving a lot

We are saving a little

We cover expenses only through our income

To cope with expenditures, we are also using oursavings

We are borrowing to cover recurring living expenses

2%

16%

39%

31%

12%

19. Which of the following sentences describes most accurately the actual financial situation of your household?





Feedback

The following is a selection of comments provided by respondents on general issues affecting households in Barbados.

A lack of knowledge on how to better manage their finances and not be duped by predators in society who use psychology techniques and marketing strategies to take advantage.

Increased taxation on consumers and increased duties and taxes on goods, while disposable income either has plateaued or declined.

Job losses. High food, gas prices. Lack of money that is needed, to pay for the supply of vital items needed for medical services at the Hospital. Increased & added taxes.

The high cost of goods and services. I cannot see a sliver of an opportunity to save. Even fresh fruits and vegetables are expensive!

The increasing NCD's impact on the health care/medication and its cost on tax payers. There need to be more alternatives available in the food/manufacturing sector.

The level of taxation is having a significant impact on households. What is ironic is the decrease in fuel prices but not in consumer goods, in most cases there have been increases.

It is impossible to eat a balanced and healthy diet not only because of the cost but the availability and quality of food in the supermarkets. Utility costs in respect of BWA have increased 300%+ since introduction of the digital meters. Taxes have been increased with the Solid Waste tax. Insurance costs for property are prohibitively high.

The economic situation is too uncertain in many cases for any real growth or development in households. The cost of food continues to rise. Saving and investment has become increasingly difficult.

The BWA rates are hurting households plus some households only have one working person cost of food keeps rising although the price of fuel has gone down the only ease we as consumers got is from light and power but no one is saying thanks to them and because things are bad a lot of inferior things are being sold in supermarket and people are buying because there can do no better they have to feed they family

The drive for growth in business is fueled by achieving more profit at the expense of value. People are influenced to buy new products and discard old ones with faults that could be fixed or with no faults at all. We are also influenced to live beyond our means.




Economic Analysis

In this section, we offer some limited economic insights from the survey responses to put the results in context. Recall from the methodology section that robust economic growth is usually accompanied by confidence level ranging from moderate to high as shown below.

FIGURE 2: CONSUMER CONFIDENCE RANGE

Our preliminary analysis of the 2015 Q1 results shows that overall consumer sentiment in Barbados is LOW having been estimated at -35% on the confidence range. The financial situation of households is negatively balanced at -16% with forward looking expectations (+4% on average) significantly brighter than the current expectations (-46% on average). The overall economic situation as perceived by respondents is LOW with -37% as the confidence rating.

The cost of living metrics were collectively the lowest in the survey with 4 out of 6 indicators ranking as VERY LOW, thereby resulting in an overall confidence ranking of -65%. Pricing pressures are a significant driver of consumer confidence and with very low sentiment prevailing in the market consumption is likely to be dampened further in the near term.

This is backed up by the sentiment regarding large purchases as consumers have indicated LOW confidence in expenditures on large purchases over the last year and further 63% didn’t think now was the best time for these purchases. The outlook for savings is mixed as 63% thought now was a good time to save but only 29% thought it was actually possible to save in the next quarter. Conversely, 37% didn’t think it was at all possible to save in the next quarter. The overall sentiment for expenditure and savings was therefore estimated at -22% (LOW) during the first quarter of 2015.

Though these are the first results of the survey, they point to households and consumer confidence that don’t appear to have the capacity to support robust economic activity at this time. We are cautious about their overall interpretation since this is just a snapshot and we will need more data with which to form a more in depth view on consumer sentiment.

International research has consistent shown a direct link between consumer sentiment and economic growth. On that basis and putting these results in context, something will have to drastically change in a positive way in both the perception and reality of households that will help create and support the conditions for economic growth. If these results hold for the

Very low Low Balanced Moderate High-20 +20 +60 +100-100 -60




foreseeable future with respect to the sentiment of consumers then the Barbados economy will not likely experience significant growth unless externally driven by foreign direct investment. Based on these results, local businesses that rely on the domestic market for most of their activity will also likely experience low confidence due to the prevailing low consumer confidence.

Savings represent future consumption and though this sentiment appears brighter than spending, the mechanics and motivation to save may be compromised due to the liberalization of interest rates of deposits in addition to low expectations regarding cost of living of households.

Acknowledgements

We would like to thank the management and staff of Barbados Today for providing support in executing the survey. Special thanks to Editor in Chief, Ms. Kaymar Jordan for spearheading efforts to raise awareness and advocacy on behalf of consumers in Barbados by leading this initiative.

We would also like to thank Mr. Ian Walcott, Partner Consultant at Global Expert Systems for his invaluable feedback and technical assistance in the design and deployment design of the survey.

A very special thank you to all those that participated in completing the survey. We look forward to your continued support.

Legal Disclaimer

This report provides information designed to help users cope with their own business, financial, legal and other needs. This information is not the same as retaining experts in those fields for advice. Although we go to great lengths to ensure the information is accurate, we strongly recommend you consult an expert, including but not limited to an economist, accountant, financial services consultant, lawyer or other professional as appropriate. Nothing contained in this report is to be considered as the rendering of financial, professional, legal or other advice for specific cases, and users are responsible for obtaining such advice from their own financial, legal or other counsel. The information contained in this report is intended for educational, background and informational purposes only.



consumer sentiment 2015 q1 barbados

Documents