John Myers Jr., Business Reporter

Director General of the Planning Institute of Jamaica (PIOJ), Dr. Wesley Hughes, is projecting 1.2 per cent economic growth in the December quarter. - File

A downturn in agricultural production and mining activities curtailed economic growth to 0.5 per cent for the third quarter, but the Planning Institute of Jamaica (PIOJ) said the performance of the economy was better than projected given the impact of Hurricane Dean and rising commodity prices on the international market.

PIOJ Director General Dr. Wesley Hughes is forecasting an equally challenging October to December quarter in light of spiralling commodities and oil prices and the continued decline of agricultural production.

He said those factors were expected to limit economic growth for the period to 1.2 per cent.

Hughes said strong growth in finance and insurance services, construction and installation and the distributive trade sub-sectors helped offset the significant fallout in 'agriculture, forestry and fisheries' and 'mining'.

The latter sectors declined 6.3 per cent and 8.6 per cent respectively for the July to September quarter, compared to the 2006 period.

Increases in the price for goods and services, primarily in food and non-alcoholic beverages, housing, water, electricity, gas and other fuels and educational expenses helped pushed inflation to 3.6 per cent during the quarter.

The country's trade deficit also widened over the period, despite a 6.6 per cent increase in exports.

The deficit from January to June of this year stood at US$1.97 billion, US$221.7 million more than the same period last year.

Focus on core business

The value of exports was US$1.07 billion.

Finance and Insurance services increased 4.0 per cent over the period under review, while construction and installation rose 3.0 per cent and the distributive trade grew 3.0 per cent.

"This performance was largely reflective of continued focus on core business by financial institutions and growth in fee and commission income," the PIOJ said.

Real estate and business services also grew 2.5 per cent during the quarter, as did transport, storage and communication, up 1.0 per cent, and miscellaneous services, up 1.7 per cent.

Although goods production dropped 1.2 per cent, manufacturing recorded marginal growth of 0.6 per cent over the period.

The growth in the transport, storage and communication sector was driven mainly by an increase in telecommunication activities over the period, as both transport and storage services declined.

Cause for decline

For the mining and quarrying sub-sector, the decline was driven by a 9.5 per cent reduction in alumina production, which resulted from damage to the Rocky Point port by Hurricane Dean.

Crude bauxite production also dropped 5.3 per cent.

The PIOJ said the decline in agriculture was driven mainly by reductions in production for both the domestic and export markets, which dropped 9.9 per cent and 2.5 per cent respectively.

However, livestock production increased by 3.5 per cent.

Electricity and water production dropped 4.6 per cent, a reflection of a 4.6 per cent reduction in electricity generation and 4.2 per cent reduction in water production over the review quarter.

Hughes is forecasting an equally challenging October to December quarter in light of spiralling commodities and oil prices and the continued decline of agricultural production.

He said those factors were expected to limit economic growth for the period to 1.2 per cent.

john.myers@gleanerjm.com