• According to data on the Producer Price Index (PPI) released by the Statistical Institute of Jamaica (STATIN), output prices in the Mining and Quarrying industry increased by 0.6% for June 2024 due to a similar 0.6% increase in the index for the major group ‘Bauxite Mining & Alumina Processing’.
• For the Manufacturing industry, there were gains in the major groups: 'Food, Beverages & Tobacco' saw a 1.2% rise, 'Chemical and Chemical Products' went up by 0.6%, and 'Paper and Paper Products' increased by 1.5%. However, these were offset by a 1.1% decline in the index for 'Refined Petroleum Products', which resulted in an over gain in the index for the Manufacturing industry of 0.6%.
• Despite the June 2024 increase in the index, the point-to-point index for the Mining & Quarrying industry declined by 2.9%. This was a result of a 3.2% fall in the index for the major group ‘Bauxite Mining & Alumina Processing’.
• The point-to-point index for the Manufacturing industry increased by 3.4%. Increases in the major groups 'Refined Petroleum Products' (10.8%) and 'Food, Beverages & Tobacco' (2.6%) contributed to this upward movement.
• Geopolitical tensions in Europe and the Middle East could disrupt oil prices and supply chains, raising producer costs. However, the global shift to renewables and increased oil production, especially by the US, might lower demand and prices. Additionally, OPEC+ plans to unwind voluntary cuts sooner than expected, raising concerns about market absorption in 2025.
• The Producer Price Index (PPI) is a significant economic indicator that tracks the average fluctuation in selling prices that domestic producers of goods and services experienced over time. Currently, the industries being tracked are Manufacturing Industry and Mining and Quarrying.

(Sources: STATIN & NCBCM Research)

• The Government of Jamaica has moved to provide temporary relief from customs duty and General Consumption Tax (GCT) on goods imported for rehabilitation works linked to Hurricane Beryl. The relief will run from July 4 to August 23
• The Ministry of Finance and Planning noted that the move arose from the activation of the Disaster Risk Management Act and the impact of Hurricane Beryl on Jamaica.
• The Minister of Finance and the Public Service approved goods, which the Commissioner of Customs is satisfied are being imported for relief and rehabilitation, to be relieved of import duty and general consumption tax.
• This is in accordance with 30B of the Second Schedule to the CustomsTariff and section 47 of the GCT Act.
• These suggest that the Minister has the authority to waive, remit, or refund all or part of the tax payable under this Act to a person liable for tax, upon receiving a written application from them. This can be done if the Minister deems it justifiable in the given circumstances. Any such waiver, remission, or refund may be conditional upon terms and conditions the Minister considers appropriate.
• Beryl became the earliest storm to develop into a Category 5 hurricane in the Atlantic and peaked at winds of 165 mph (270 kph). It weakened to a still-destructive Category 4, with maximum sustained winds of 150 mph, just hours before impacting Jamaica on Wednesday, July 3, 2024.

 (Source: Caribbean National Weekly)

• Consumer price inflation (CPI) in Barbados will fall to an estimated average of 3.9% in 2024 and 3.0% in 2025, owing mainly to stabilising commodity prices says Fitch Solutions. This forecast is down significantly from average price growth of 5.0% in both 2022 and 2023.
• Slowing inflation will provide support to real household incomes, private consumption, and wider economic growth in Barbados. Real GDP growth is forecasted to grow by 3.1% in 2024 and 2.1% in 2025.
• That said, despite accelerating consumer spending due to the impacts of a robust tourism sector and recovering real incomes, core inflation will be kept in check by government fiscal austerity efforts, which are in line with International Monetary Fund (IMF) loan conditions.
• However, risks to price growth are tilted to the upside, with the potential for any commodity-price driven shock to push up inflation and slow Barbados’ economic recovery. As an island economy, Barbados imports 95% of its energy (mainly hydrocarbons) and around 85% of its food from abroad and is therefore highly exposed to the global rise in commodity prices.

(Source: Fitch Solutions)

• Consumer prices in Brazil rose more than expected in the month to mid-July on higher transportation costs, official data showed on Thursday, July 24, likely sealing the deal for the central bank to keep interest rates on hold at a policy meeting next week.
• Prices, as measured by the IPCA-15 index, were up 0.30% in the period, statistics agency IBGE (Brazilian Institute of Geography and Statistics) said, slowing from 0.39% in the previous month but overshooting the 0.23% increase forecast by economists polled by Reuters.
• In the 12 months to mid-July, inflation in Latin America's largest economy stood at 4.45%, up from 4.06% the month before and exceeding the 4.38% expected by economists in the Reuters poll.
• Jason Tuvey, an economist at Capital Economics, said that coming alongside fiscal concerns and recent weakness of the Brazilian real, the latest inflation data backed a view that the central bank will not resume rate cuts this year.
• Brazil's central bank targets inflation at 3%, plus or minus 1.5 percentage points. Last month, the monetary authority unanimously halted a rate-cutting cycle, citing higher inflation expectations and fiscal struggles.
• The next decision is scheduled for July 31, and markets believe the bank will maintain its key rate at 10.50%.

 (Source: Reuters)

• The U.S. economy grew faster than expected in the second quarter, but inflation subsided, leaving intact expectations of a September interest rate cut from the Federal Reserve.
• Gross domestic product increased at a 2.8% annualized rate last quarter, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday. Economists polled by Reuters had forecast GDP rising at a 2.0% rate. Estimates ranged from a 1.1% rate to a 3.4% pace. The economy grew at a 1.4% rate in the first quarter.
• The economy, which continues to outperform its global peers despite hefty rate hikes from the Fed in 2022 and 2023, remains supported by a resilient labor market even as the unemployment rate has risen to a 2-1/2-year high of 4.1%.
• The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased at a 2.9% rate after surging at a 3.7% pace in the first quarter, welcome news for U.S. central bank officials ahead of their two-day policy meeting next week.
• The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for the past year. It has hiked its policy rate by 525 basis points since 2022. Financial markets expect three rate cuts this year, starting in September.
• Despite the solid economic growth pace, the outlook for the second half of the year is hazy. The labour market is slowing, which will have an impact on wage gains.

 (Source: Reuters)

• British business activity picked up this month after a lull in the run-up to a July 4 election, bolstered by the fastest manufacturing growth in two years and the strongest inflow of new orders since April 2023.
• The figures may cheer Prime Minister Keir Starmer's new government - which is targeting faster growth to allow higher public spending - and the Bank of England too, as inflation pressures fell to their lowest in more than three years.
• Although growth so far this year has exceeded most forecasters' expectations, Britain's economy has performed relatively poorly since the COVID-19 pandemic. Among the Group of Seven rich economies, only Germany has done worse, as it took an even bigger hit than Britain from the surge in European natural gas prices, which followed Russia's full-scale invasion of Ukraine in 2022.
• There were, however, positives in July's S&P Global Flash Composite Purchasing Managers' Index as it rose to 52.7 from June's six-month low of 52.3, a shade higher than the 52.6 forecast in a Reuters poll of economists. The result was also stronger than the same survey for the eurozone, which fell to 50.1 from 50.9, below all economists' forecasts and within a whisker of recessionary territory.
• However, consultancy Capital Economics estimated that the PMI reading was only consistent with a quarterly growth rate of 0.2% in July, below the robust pace of 0.6%-0.7%, which they forecast for the three months to the end of June.
• Britain's economy grew just 0.1% last year. The International Monetary Fund forecasts 0.7% growth for 2024. The BoE will publish new inflation forecasts on Aug. 1, but investors have scaled back bets that it will cut interest rates from their 16-year high of 5.25% after data last week showed services price inflation and wage growth remained high.

(Source: Reuters)

• The Government plans to tap $5Bn from its disaster risk financing resources to address the immediate relief and recovery efforts related to Hurricane Beryl.
• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, made the disclosure during a Statement to the House of Representatives on Tuesday (July 23). “We plan to disburse $1.3Bn to the Ministry of Economic Growth and Job Creation to finance programmes announced by the Prime Minister last week, and we plan to disburse $1Bn to the Ministry of Labour and Social Security,” Dr. Clarke said.
• “Any expenditure beyond this amount that falls into this fiscal year will be financed from the proceeds of donations and the donations which have been pledged thus far,” he added. The Minister informed that all expenditures undertaken in relation to Hurricane Beryl will be represented in the First Supplementary Estimates to be tabled later this year.
• Meanwhile, Dr. Clarke said he has been informed by the Caribbean Catastrophe Risk Insurance Facility (CCRIF) that Jamaica’s tropical cyclone and excess rainfall policies have been triggered with payout amounts of US$16.3Mn (J$2.5Bn) and US$10.3Mn (J$1.6Bn), respectively. He further noted that the path and intensity of Hurricane Beryl did not trigger Jamaica’s catastrophe bond.
• “As such, the disaster risk financing resources available to the Government, due to the pre-financing of disaster risk, totals approximately $10.9Bn, made up of $5.3Bn in the contingencies, $4.1Bn from CCRIF, which is to come; $1Bn, which we have budgeted for the National Natural Disaster Risk Fund; and National Disaster Fund of $500Mn,” Dr. Clarke highlighted.

 (Source: JIS)

• Senior financiers in Jamaica’s banking system say “migration and unexpected expenses” are amongst the top two reasons why people are late to pay their loans each month. An increasing number of Jamaicans are falling behind on their regular monthly loan payments, but the central bank says it is not yet worried.
• The data captured in the figures are for past-due loans, which are loans that have not been paid from anywhere between 30 days to 89 days. The migration of individuals who obtain loans from banks with no intention of repayment has become a significant concern for the banking industry. While it is understood that debt does not vanish upon relocation, the process of debt collection becomes increasingly difficult for lenders when borrowers move abroad.
• Due to the distinct credit systems and regulations of each country, tracking individuals who migrate can pose a challenge for creditors. Although reports suggest that a particular group of Jamaican migrants may be more responsible than others, the group has not been identified. In general, migrants recorded as overseas residents were behind on payments amounting to $6.8Bn as of March.
• Actors in the banking sector manage growth in past due loans by promptly contacting borrowers through emails and phone calls soon after loans become overdue. The introduction of credit bureaus in Jamaica has had a positive impact by making people aware of the consequences of non-payment on their credit history. This awareness has influenced behavior as individuals now consider how it could affect their ability to secure loans in the future.
• Overall “The stock of these loans on the balance sheet of the deposit-taking institutions grew by 32.1% to $42.9Bn in March 2024 from $32.5Bn in March 2023,” the central bank said. Further data show past due loans rose again to $50.1Bn by the end of April before declining to $41Bn at the end of May.
• However, the Bank of Jamaica (BOJ) said the increase in past due loans must be looked at in the context of the growth in the overall loan book of the nation’s eight commercial banks and one merchant bank. From that perspective, the ratio of past due loans to total loans was up “marginally to 2.96% at March 2024”, the central bank pointed out.

(Source: Caribbean National Weekly)

• Mexico’s fiscal deficit will widen from 3.4% of GDP in 2023 to about 5.3% this year, which would represent the weakest outturn since 1989, according to projections from Fitch Solutions.
• Data available to May have generally been consistent with the government’s revised estimates from March, with the deficit running roughly 10% below target on the back of a strong tax take (+10% y-o-y, +3% versus budget). Spending growth has been effectively in line with plan but remains robust at +22% y-o-y.
• While higher debt servicing costs are partially to blame, the bulk of this increase can be explained by a notable ramp-up in social spending and public investment ahead of general elections in June.
• There are expectations to see some moderation in expenditure growth over the second half of 2024 as several large infrastructure projects are completed, but the impact on the budget balance will be offset by softness in revenues as the economy slows.
• A pullback in spending will see the deficit narrow to 4.0% of GDP, but this would still represent an overshoot relative to the government’s target of 3.5%.
• Overall, wide budget deficits this year and next will see Mexico’s federal debt-to-GDP ratio rise from 46.8% in 2023 to 48.6% in 2024 and 49.4% in 2025, only marginally below a record high of 49.9% in 2020.

(Source: Fitch Solutions)

• Following the Central Bank of Trinidad and Tobago’s (CBTT) announcement of a reduction in reserve requirements for commercial banks to 10% from 14%, economist and former minister in the Ministry of Finance Mariano Browne said this could increase foreign exchange demands.
• The CBTT announced the reduction in a release on July 19 following a Monetary Policy Committee (MPC) meeting held the same day. The Committee noted that a lowering of the reserve requirement, accompanied by greater reliance on open market operations, would have an immediate impact on liquidity. These factors led to the reduction of the primary reserve requirement.
• "Since the effect of reducing the reserve requirement is potentially expansionary by increasing consumption, we can presume that the CBTT is attempting to expand demand and increase economic activity. The CBTT has stated that 2024 economic growth prospects were 'modestly' favourable. Perhaps this injection in disposable income is to help boost economic growth,' said Browne.
• However, Browne noted the real risk of expanding the economy is the risk of inflation and an increase in foreign exchange demand.
• 'This expansion is not likely to lead to moderate inflation. However, any expansion will increase the demand for foreign exchange, which is already in short supply. That is the real danger as foreign exchange reserves have continued to slide as energy import values and volumes have declined,' explained Browne. He added that this reduction suggests banks will have more money to lend.
• "Making more loans has a positive effect on consumer buying power. This means that banks can lend more and the loan funds are then spent or invested,' Browne said. He added that this reduction could also potentially increase consumption.

 (Sources: Trinidad Express Newspaper & CBTT)