It is just as well that the hurricane forecasters are predicting a near-normal season with only a 25 per cent probability of above-normal hurricane activity, because Jamaican consumers need a respite from the bombardment they have taken over the past five seasons. As I pointed out in last week's column, except for 2006, we have suffered double-digit inflation over the period, substantially caused by hurricane-related disruption of local agricultural production. Still, with only two months of the season behind us, and three of the more active months ahead, we have to brace ourselves for the worst.

According to the National Oceanic and Atmospheric Administration of the United States of America, there is a 70 per cent chance of four to seven hurricanes, including one to three major hurricanes this season. They, however, point out that global weather patterns are, these days, affected by greater uncertainty than in the recent past. Hence, Jamaica, Cuba, Hispaniola, and the more than 35 million Americans who live in the Gulf of Mexico region that are the most frequent 'targets' of hurricanes, could still be on the receiving end of a category three or four hurricane this season.

Impact of hurricane damage

The impact of hurricane damage on food-price inflation was severe in 2007 and 2008, and came on top of the jolt delivered by explosive increases in international oil and grain prices. Cost-of-living pressures around the world were becoming unbearable this time last year before oil prices collapsed in the latter part of the year, and though they have increased sharply since the start of this year, the pressure has subsided for the time being. In the case of Jamaica, the devaluation of the dollar earlier this year and tax increases on petroleum products, as well as the widening of the GCT net, have exerted some pressure, but nowhere near the runaway pace of 2008.

My limited information on domestic food prices at Coronation Market indicates that the pressure has been moderated as production of many domestic food crops has picked up. In most cases, prices have come back down to the pre-Gustav, July 2008, levels or are lower, and should hold for the rest of the summer, which, so far, has not been unusually dry. For example, the prices for cabbage, tomato, sweet potato and dasheen in early July were at about the same levels as July 2008. Lettuce, scallion, onion, sweet pepper, string beans and Irish potato were selling at lower prices, while yam, coco, cho-cho, carrots and green bananas were going at relatively higher prices.

Holding cost-of-living pressures in check is now more important given that a wage freeze is in effect for public-sector workers, unemployment is rising, and most sectors of the economy are declining. Jamaicans who depend on remittances will also have to tighten their belts as, up to May, inflows from this source had fallen by nearly 17 per cent. This meant that over US$140 million or J$12.5 billion less was available for spending by households.

A major challenge of the economic adjustment made necessary by the global crisis, and of any IMF agreement will, therefore, be to minimise cost-of-living increases in an environment where household incomes are being squeezed. The findings of the second-quarter survey of consumer confidence suggest, however, that a significant percentage of Jamaican consumers may be underestimating the severity and length of the global crisis and the effects it will ultimately have on their lives. Apparently, they are anticipating improvement in job opportunities despite contraction in the labour market, and planning vacations in larger numbers, though a declining percentage were expecting increases in incomes.

Counter-intuitive outlook

This outlook is counter-intuitive, as all indications are pointing to a long global recession. Hence, consumers in most countries are expecting conditions to remain tough for some time and are curtailing their spending plans. Businesses are also holding back on investment as credit remains tight except in China and a handful of emerging economies. Jamaica's major markets are, therefore, going to be weak at least until 2010.

It is obvious that the full effects of the economic fallout have not yet been felt locally. Even where plant closures have already taken place, as in the bauxite industry, the impact will only feed through fully later this year and early next year. Remittances are also likely to continue to fall, as the unemployment rate is expected to climb in the USA, Canada and the United Kingdom in the coming months and into the first half of 2010.

The business community seems to be more realistic about the situation, with a large percentage of firms expecting a slow recovery and anaemic gains in profits. Many, though, expect that economic conditions will stabilise at existing levels and not get worse in the period ahead. Based on the available data and projections for the global economy and trade, it is going to be an uphill struggle to meet these expectations.

A bout of good luck with the weather and continuing moderate oil prices should, therefore, be at the top of the national wish list. The reality, however, is that we should anticipate tougher times before things begin to turn around.

Dennis E. Morrison is an economics. Feedback may be sent to columns@gleanerjm.com.