Spending over the holiday season in Jamaica wasn’t as robust as anticipated based on data just coming out of the Bank of Jamaica (BOJ).
The BOJ, which is Jamaica’s Central Bank, is reporting that the currency in circulation for last month was way below projections, indicative that spending was not as great as anticipated.
Data from the BOJ covering the last five workdays of December 2019 (Dec 23-31), shows that net currency for the period to financial institutions (commercial banks, building societies and Cambios) grew by a mere $2.94 billion. There is normally a stronger demand for currency during the month of December, associated with increased spending over the holiday period.
As such, financial institutions would request more currency from BOJ to satisfy this demand. In spite of the $2.94 billion growth in money in circulation for the last five days of December, this was below the bank’s projection for the period of $7.37 billion, as well as below the average growth of $4.58 billion over the past five years.
This meagre growth in circulation for the week contributed to an overall growth of $18.9 billion or 14.5 per cent for the entire month of December 2019. This too was below the BOJ’s projection for growth of $22.4 billion or 17.2 per cent.
The growth in money in circulation for the month also fell below that for December 2018 (21.4 per cent) and was the lowest growth in a December month over the past decade. At December 31, 2019, the currency stock was $148.9 billion, representing an annual increase of 11.5 per cent, relative to annual growth of 20.4 per cent.
When the estimated change in consumer prices is taken into account, the real annual growth in currency at end-December 2019 was 5.6 per cent, compared to 17.5 per cent for the corresponding period in 2018. The Central Bank is anticipating that the majority of the currency issued during December 2019 will be redeemed during January 2020. For the last five years, net currency redemption in January averaged 73.2 per cent of the net currency issued in the preceding month. Bank of Jamaica (BOJ) issues and redeems notes and coins daily in order to meet the demand for cash from individuals and businesses.
· Currency Issue (or Currency Stock): refers to Jamaican notes and coins in the hands of the public (currency in circulation) in addition to notes and coins held by financial institutions in their vaults (vault cash) at a point in time. Bank of Jamaica redeems (buys) or issues (sells) notes and coins to financial institutions when institutions have a demand for cash. The difference between currency issued and that which is redeemed during a period of time is referred to as net currency issue.
· Real Currency Growth: reflects the percentage change in the real stock of currency which is calculated as the nominal currency stock divided by the consumer price index (CPI) at a given point in time.