Peru's inflation closed 2023 at 3.24%, the lowest annual rate in three years, official data showed on January 1, 2024, after consumer prices rose marginally in December. The easing of inflationary pressures is a small boost for the country in the throes of an economic recession.
The central bank had initially projected inflation in 2023 would end at 3.8% before adjusting its forecast to 3.1% last month following a string of promising inflationary indicators that saw a quicker-than-expected recovery.
The 2023 inflation rate is the lowest rise since 2020, when prices in the mining nation rose 1.97% for the year; and also stands as one of the lowest rates in Latin America.
The latest data brings Peru's inflation within a breath of the central bank's target range of 1% to 3%. Notably, at the start of 2023, consumer prices in Peru had risen 8.66% in the 12 months through January.
Nonetheless, the world's second-largest copper producer is struggling with the adverse effects of the El Nino weather phenomenon, lower private investment mainly in mining, and the threat of more anti-government protests.
The central bank has warned that the fight against inflation could be hampered by a stronger El Nino in 2024.
Investors appear convinced that major Western central banks are close to a much awaited pivot, from raising interest rates to cutting them. Markets rallied as a result, but 2024 could hold surprises as the world adjusts to an economic order where money is not cheap.
In the United States, investors are now effectively positioned for the Federal Reserve, guiding the economy to a perfect landing, bringing down inflation without triggering a recession. The market's conviction comes after the U.S. economy surprised people with its resilience. However, many investors and executives think the probability of a perfect landing is low. The pandemic-era savings are getting depleted and storm clouds are gathering, especially with what's shaping to be contentious U.S. elections.
Investors are betting that the Fed could cut rates by as much as 1.5% by the end of 2024, but that would still leave policy rates at close to 4%, higher than where it has been for most of the past two decades. At that level, monetary policy will still be a drag on growth, as it would be above the so-called neutral rate at which the economy neither expands nor contracts.
Add to that, there are a host of other risks to the outlook in 2024, including two major wars, heightened geopolitical tensions that have put globalization firmly in reverse, and elections in several countries that could radically change the world order in unexpected ways. While the Fed and other banks have been raising rates for well over a year, the world is yet to complete the transition from the time when money was free to a period when it no longer is. 2024 is likely to be the year when the effects of that transition manifest more clearly.
That means companies and, in some cases, entire countries will have to restructure their debt liabilities, as they can no longer afford to pay interest. Some of that is already visible in emerging market debt negotiations and rising bankruptcies of companies.
The U.S. federal government's total public debt has reached $34 trillion for the first time, the U.S. Treasury Department reported on Tuesday as members of Congress gear up for another series of federal funding battles in the coming weeks.
The debt that counts toward the federal debt ceiling rose to $33.89 trillion on Friday from $33.794 trillion on Thursday. This "debt subject to limit" category excludes the unamortized discount on Treasury bills and zero coupon bonds, debt issued by the Federal Financing Bank, and guaranteed debt of certain other agencies.
The milestone comes shortly after the federal debt topped $33 trillion in September amid rising federal deficits fueled by falling tax revenues and rising federal expenditures.
Congress returns to Washington next week to tackle Jan. 19 and Feb. 2 deadlines for settling government spending through September, amid Republican demands to reduce fiscal 2024 discretionary spending below caps agreed in June. Lawmakers also hope to pass emergency aid for Ukraine and Israel, possibly with unrelated U.S. border security provisions attached.
Failure to approve the one-dozen fiscal 2024 spending bills would plunge Washington agencies into shutdown mode. However, reaching a compromise could become more difficult with the November presidential and congressional elections coming quickly into focus.
Maya MacGuineas, president of the Committee for a Responsible Federal Budget, a fiscal watchdog group, called the $34 trillion federal debt figure "a truly depressing achievement," attributing it to political leaders' unwillingness to make difficult fiscal choices.
During the third quarter of 2023, total value added at constant prices for the Jamaican economy grew by 2.1% when compared to Q3 2022. This reflected growth in both the Services and Goods Producing Industries of 2.1%.
Improved performances were recorded for Transport, Storage & Communication (6.0%), Hotels & Restaurants (6.7%), Other Services (4.5%), Finance & Insurance Services (1.5%), Electricity & Water Supply (6.7%), Real Estate, Renting & Business Activities (0.9%) and Wholesale & Retail Trade; Repairs: Installation of Machinery & Equipment (0.3%). However, the Services Industry’s outturn was tempered by a decline in Producers of Government Services, which was down by 0.9%.
Within the Goods Producing Industries, there was higher output levels in Mining & Quarrying (103.1%), Manufacturing (2.1%), and Construction (0.7%). However, the Agriculture, Forestry & Fishing industry continued to be impacted by dry conditions during most of that quarter, which result in a 9.3% decline in its value added.
Total value added at constant prices grew by 1.2% compared to the second quarter of 2023. This was also impacted by the performance of both the Services and Goods Producing Industries. The Services Industries grew by 0.7% and the Goods Producing Industries by 2.6%.
The 2.1% growth over the quarter was 0.2% higher than the Planning Institute of Jamaica’s (PIOJ) estimate of real value added of 1.9%, released a few weeks ago. Furthermore, PIOJ noted that the performance of the local economy is expected to be generally positive for the October to December quarter, with key sectors, including tourism, leading the outturn.
For October to December 2023, the economy is projected to grow within the range of 1.0% to 2.0%, resulting in calendar year growth (January to December 2023) within the range of 2.0% to 3.0%. For Fiscal Year 2023/24, the projection is for growth within the range of 1.0% to 2.0%.
Prime Minister Andrew Holness has announced an extension of the toll-free period for the May Pen to Williamsfield leg (Phase 1C) of the East-West Highway, now through March 31, 2024. This extension grants the public an additional three months of toll-free travel on this new segment of the highway.
This decision is intended to provide more time for ongoing negotiations between TransJamaican Highway Limited (TJH) and the National Road Operating and Constructing Company Limited (NROCC). These discussions focus on finalising the concession for Phase 1C, for which TJH, the current operator of the Kingston to May Pen segment of the East-West Highway, holds a right of first refusal.
Prime Minister Holness highlighted the significant benefits of the May Pen to Williamsfield Highway, noting the reduced travel times and lower vehicular wear and tear for motorists. Looking ahead, the Government plans to further extend the highway to bypass Spur Tree within the next five years, continuing its commitment to improving Jamaica’s road infrastructure.
As these developments progress, Prime Minister Holness emphasized the importance of responsible driving and urged all motorists to prioritize safety on the roads.
Venezuelan President Nicolas Maduro last Thursday said that the deployment of a British warship to waters off the coast of Guyana breaches the "spirit" of an agreement reached between Venezuelan and Guyanese authorities.
In a statement, Venezuela's Foreign Ministry said the country "reserves all actions, within the framework of the Constitution and International Law, to defend its maritime and territorial integrity."
Since this, Brazil expressed concern, noting that "The Brazilian government believes that military demonstrations of support for any party must be avoided, so that the ongoing dialogue process can produce results". It urged all parties to "contain themselves" and resume talks.
That said, Vice President Dr Bharrat Jagdeo highlighted that Guyana has no plans to take any offensive action against Venezuela and that the British Warship visiting the country has been long planned and is part of building a defensive capability in Guyana.
Neighbours Venezuela and Guyana agreed earlier this month to avoid using force or increasing tensions in their long-running dispute border dispute over the Esequibo territory.
A leading economist has sounded an alarm over what he has described as a significant decline in domestic investment and a stall in the renewable energy thrust that could threaten Barbados’ economic development in the new year.
Professor of Economics Justin Robinson has suggested that the government find a way to treat these issues as a matter of urgency if it is to effectively manage the national debt. He identified these issues as the primary challenges facing the government in 2023 and likely to persist into 2024.
Regarding the decline in project financing by local investors, he noted the government’s heavy reliance on borrowing money, deeming it a risky practice. The university academic highlighted the challenge of financing the rollover of government debt, pointing out that the absence of substantial investments by domestic investors requires foreign borrowing to meet financial needs.
“Domestic investments was better than the previous year, but the amount of financing that was provided by domestic investors was still small compared to historic trends, which meant that the government again had to substitute, and engage in foreign borrowing to meet its financing needs. So, think of it in two parts: there is a deficit for the year which it has to finance, but then also the debt that is maturing.”
That being said, the economist commended the government’s management of public finances, which is reflected in solid primary surpluses, reduced deficits, and debt-to-GDP ratios. Despite positive indicators, he noted the scepticism among domestic investors, emphasising the need for a balance between foreign and domestic financing to address concerns about foreign exchange.
Higher consumer spending over the holiday season, real wage gains over the last nine months, and a jump in consumer confidence point to a good start for 2024, said Jared Bernstein, chair of the White House Council of Economic Advisers.
U.S. consumer confidence increased to a five-month high in December, mirroring a nearly 14% increase in the University of Michigan's benchmark Consumer Sentiment Index, its biggest jump in more than three decades. Of note, for most of Biden's term, the Michigan index has reflected widespread pessimism about the economy among households. Still, the new data showed Americans' growing confidence that inflation was finally trending lower.
Michigan survey director Joanne Hsu noted the upswing in December reversed "all declines from the previous four months. These trends are rooted in substantial improvements in how consumers view the trajectory of inflation."
Indeed, inflation has eased substantially over the course of 2023. The Labor Department's Consumer Price Index began the year with annual price increases averaging 6.4%. By November, that was down to 3.1%.
Despite the growing optimism, the Biden administration says it remains alert to geopolitical risks, including Russia's ongoing war in Ukraine, which has the potential to disrupt grain markets and push up inflation again. In the Middle East, Israel predicts its war with Hamas militants will last for months, increasing the risk of regional escalation. In the Red Sea, attacks by Iranian-backed Houthi militants in Yemen have disrupted world trade.
China's manufacturing activity shrank for a third straight month in December and weakened more than expected, clouding the outlook for the country's economic recovery and raising the case for fresh stimulus measures in the new year.
The government has, in recent months, introduced a series of policies to shore up a feeble post-pandemic recovery, which is being held back by a severe property slump, local government debt risks, and soft global demand. But the world's second-largest economy is still struggling to gain traction.
China's central bank said it would step up policy adjustments to support the economy and promote a rebound in prices amid signs of rising deflationary pressures. Notably, China's consumer prices fell the fastest in three years in November, while factory-gate deflation deepened, weighed by weak domestic demand.
Weak external demand also remained a major drag on factory activity, with new export orders index registering 45.8 in December, contracting for the ninth straight month. The sub-index of factory gate prices was at 47.7, contracting for a third straight month, adding to signs of deflation and pressure on business profits.
The official non-manufacturing purchasing managers' index (PMI), which includes services and construction, rose to 50.4 from 50.2 in November, supported by a recovery in the vast services sector.
For November 2023, output prices for producers in the Mining and Quarrying industry increased by 0.4%, while those for the Manufacturing industry declined by 0.7%, according to yesterday’s release from the Statistical Institute of Jamaica (STATIN).
The rise in the index for the major group ‘Bauxite and Alumina Processing’ accounted for the increase in the index for the Mining and Quarrying industry.
For the Manufacturing industry, the reduction in the industry’s index was due mainly to a 4.0% decline in the index for ‘Refined Petroleum Products’ as fuel prices on the international market declined amid concerns over the projections for weaker economic growth in 2024. The overall reduction in the industry’s index was tempered by a 0.2% rise in the index for ‘Food, Beverages and Tobacco’.
With November’s outturn, the index for the Mining & Quarrying industry has risen by 4.7% for the period November 2022 to November 2023.
Over the same period, the point-to-point index for the Manufacturing industry increased by 2.1%. The major groups ‘Food, Beverages & Tobacco (2.3%)’. ‘Refined Petroleum Products’ (2.6%) and ‘Other Manufacturing n.e.c’ (10.1%) were the primary contributors to the movement. However, these increases were moderated by a decline of 4.3% in the index for the major group ‘Fabricated Metal Products excluding Machinery & Equipment’.
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 experience over time.
