• U.S. retail sales experienced the most significant drop in 10 months in January, with a 0.8% decline, primarily attributed to adverse weather conditions and challenges in adjusting data for seasonal fluctuations.
• The Commerce Department's report indicates a potential slowdown in consumer spending, as retail sales for November and December were revised lower. However, a tight labour market and elevated wage growth suggest that consumer spending is not collapsing.
• The severe weather conditions, including frigid temperatures and snowstorms, contributed to the decline in retail sales. Building material and garden equipment store sales, motor vehicles and parts dealers, and gasoline station receipts were particularly affected.
• Freezing temperatures also impacted factory production, with a 0.5% decline reported in manufacturing output. Despite these weak reports, expectations for the U.S. central bank to refrain from cutting interest rates before May remain unchanged.
• While import prices saw their biggest gain in nearly two years, online sales dropped in January, and core retail sales (excluding specific categories) decreased by 0.4%. Despite these mixed signals, economists believe that consumer spending will continue to rise at a solid pace, supported by a resilient labour market and growing household purchasing power.

(Source: Reuters)

• TransJamaica Limited recorded a net profit of US$23.86Mn for the twelve months ended December 31, 2023. This represents a 434.2% YoY turnaround in profitability, primarily bolstered by strong quarterly performances and significant cost savings throughout the year.
• For the Twelve months ending December 31, 2023, revenue was US$75.20Mn, reflecting an increase of 15.7% compared to US$65.06Mn for the same period in 2022. The significant increase was due to greater traffic levels over the previous year and movements in the toll tariff, which is reviewed annually.
• Operating expenses for the twelve months improved to US$22.44Mn or 43.8% from US$39.91Mn in 2022. This was primarily due to cost savings that continue to accrue to TJH from the acquisition of the subsidiary, Jamaican Infrastructure Operator (JIO), which allowed for the modification of the fees, thus reducing its cost to operate. This was, however, partially offset by bank and security charges incurred, higher maintenance costs, including spares and equipment purchased to improve the services, cost for renovation works that are currently being done at the Portmore Toll Plaza, and higher Insurance costs associated with the renewal of its coverage for the motorway.
• The Group’s administrative expenses primarily comprised of staff costs, plant and equipment depreciation, and other routine office expenses, came in at US$8.36Mn for the full year (FY). This represents a rise of US$6.61Mn relative to US$1.75Mn for FY 2022, influenced by subsidiary’s staff and related costs and increased consultancy fees.
• The acquisition of JIO has resulted in a one-time settlement loss of US$13.88Mn; however, TransJamaica stands to gain from future cost savings as this transaction has significantly reduced its Operating Expenses by more than 40% for the twelve months and increased its profitability which is expected to continue in subsequent years. Furthermore, increased traffic flows have bolstered and will continue strengthening the company’s topline.
• In addition, TJH has the first right of refusal to maintain and operate the May Pen to Williamsfield leg of Highway 2000 and is currently in negotiations with the government regarding the concession. If the company is successful in securing the concession, we anticipate that it will provide an additional boost to TJH’s revenues and profitability, as the road is a major thoroughfare along the south coast and will significantly reduce travel time to Kingston from Mandeville for motorists.
• TJH’s stock price has increased by 17.7% since the start of the calendar year. The stock closed Tuesday’s trading session at $3.19 and currently trades at a P/E of 10.29x below the Main Market Energy, Industrial, and Materials Sector Average of 12.42x.

(Sources: JSE and NCBCM Research)

• Mailpac Group Limited (“Mailpac Group”), one of Jamaica’s leading businesses in e-commerce logistics and solutions, announced that it has agreed to acquire MyCart Express (“MyCart”), the fastest-growing and second-largest courier company in Jamaica.
• This strategic transaction not only positions the combined entity as the largest courier platform in the Caribbean, delivering over 1.5Mn packages annually, but also merges the complementary management, service offerings, and geographic footprint of both entities to deliver superior growth to stakeholders.
• Following the transaction, the Board of Directors plans to hold an extraordinary general meeting to propose rebranding Mailpac Group as MyPac Group. MyPac will operate multiple e-commerce brands, including Mailpac (premium courier), MyCart (value courier), ‘Pack Yuh Barrel’ (digital barrel packing and shipping), and Mailpac Local (local online purchasing).
• The Group will be led by a management committee consisting of Khary Robinson and Garth Pearce of Norbrook Equity Partners Limited ("Norbrook"), Mark Gonzales and Samantha Ray of Mailpac, and Kamar Palmer and Aldane Smith of MyCart. The management of each brand will stay unchanged.
• In addition to doubling the size and capacity of Mailpac Group, the transaction will see the owner-operators of MyCart becoming shareholders of the publicly listed company, significantly adding to the innovation and execution capacity of the Group. Mailpac and MyCart will also strategically focus on their core market segments with appropriate services and pricing.
• Khary Robinson, also the Executive Chairman of Mailpac Group, highlighted that this transaction marks a pivotal moment in the logistics sector, with MyPac poised to deliver exceptional courier services across Jamaica and the Caribbean. He further noted that the combined expertise, resources, and innovative approaches of Mailpac and MyCart create a formidable force that will shape the future of logistics in the region.

 (Source: JSE)

• An overturned vessel has caused a huge oil spill along Trinidad and Tobago’s coastline, in what the Caribbean country’s prime minister described as a “national emergency” on Sunday.
• The spill occurred on February 7 off the southern shores of Tobago Island, and about 15 kilometres of the coastline “is now blackened,” according to the country’s Office of Disaster Preparedness and Management (ODPM).
• In a news conference Sunday, Prime Minister Keith Rowley said that “the situation is not under control, and origins of the vessel have not yet been identified.” He went on to note that “This is a national emergency and therefore, it will have to be funded as an extraordinary expense. However, the government is not certain of the “full scope and scale” of what is going to be required.
• The spill occurred during Carnival season, one of the country’s biggest tourist attractions. “The best part of Tobago’s economy is its tourism, so it is important that we be cognizant that we don’t expose the tourism product to this kind of thing, and because this has happened, we have to contain it,” the prime minister said.
• Authorities installed booms - floating barriers - to prevent the spill from spreading to other areas, said Farley Augustine, the chief secretary of the Tobago House of Assembly. Officials have also dispatched divers to try to plug the leak but have not been successful.

 (Source: CNN)

• If the Israel-Hamas war were to expand into a regional conflict and have a meaningful impact on global oil prices, it would place pressure on inflation rates in Latin America and likely delay or reverse rate-cutting cycles.
• However, compared to other regions of the world, Fitch believes that Latin America is relatively insulated from the impacts of the ongoing disruptions to trade in the Red Sea. 
• This is so, as virtually none of the region’s trade travels through the Suez Canal or the Red Sea, as its major partners – the US, Europe, and Mainland China – are directly accessible across the Atlantic and Pacific oceans.
• Notwithstanding, Latin America is vulnerable to a spike in oil prices due to a potential regionalisation of the Israel-Hamas war. Furthermore, if a spike in oil prices were to happen, Latin America, like every other region in the world, would see a notable inflationary impact.
• Finally, Fitch does not expect much of a political impact in Latin America from the conflicts in the Middle East, despite divisions over the Israel-Hamas war.

(Source: Fitch Solutions)

• After a brief decline in December and January, mortgage rates are on the rise again. The average contract interest rate for 30-year fixed-rate mortgages increased to 6.87% from 6.80% the previous week, marking the highest rate since early December 2023.
• The increase in mortgage rates is affecting mortgage demand, with total mortgage application volume falling by 2.3% compared to the previous week, and both applications for home purchases and refinancing showing declines.
• Applications to refinance a home loan dropped by 2.0% for the week but were still 12.0% higher than the same week one year ago. Despite rates being half a percentage point higher than a year ago, recent rate drops from a 20-year high have prompted some borrowers to seek savings through refinancing.
• Purchase applications for mortgages to buy homes decreased by 3.0% for the week and were 12.0% lower than the same week a year ago. Affordability challenges, elevated mortgage rates, and low existing housing inventory are cited as factors contributing to the subdued purchase activity in the housing market. Harsher winter weather is also noted as a factor limiting house hunters' activities.
• Additionally, a recent government report on inflation causing rates to surge even higher is highlighted, with the average rate on the 30-year fixed reaching 7.08%, leading to immediate reactions in the bond market and prompting mortgage lenders to raise rates.

(Source: CNBC)

• The Congressional Budget Office (CBO) director, Phillip Swagel, cautioned House lawmakers about the growing national debt and the potential existential threat it poses to the U.S. economy.
• The CBO's semi-annual report indicated that the U.S. yearly budget deficit is expected to increase by an estimated US$1.0Trn over the next decade, reaching US$2.6Trn in 2034. Net interest costs are predicted to surpass non-defense discretionary spending by 2024, climbing to 3.9% of GDP in 10 years.
• Swagel attributed the rising national debt to factors such as high interest rates, an ageing population, and increased federal healthcare costs. The projected debt is set to reach a record 116.0% of GDP by the end of 2034, potentially impacting social security benefits.
• Republicans on the committee welcomed findings indicating that the Fiscal Responsibility Act of 2023 helped marginally reduce the deficit. The bipartisan bill, negotiated by former GOP House Speaker Kevin McCarthy, linked raising the debt ceiling with federal spending caps.
• Democrats, like Dan Kildee from Michigan, emphasised the need for changes to the tax code to generate more revenue and criticised previous tax cuts. Swagel highlighted the CBO report's key finding that increased immigration could positively impact the U.S. economy, contributing to GDP growth and additional tax revenue over the next decade.

(Source: CNBC)

• The Planning Institute of Jamaica (PIOJ), launched the Inclusive Growth Index Framework (IGIF), a comprehensive measurement tool for growth.
• The index, developed by the PIOJ’s Growth Inducement Programme (GIP), provides a more comprehensive understanding of the inter-relatedness of key drivers of growth specific to Jamaica.
• In his remarks at the virtual launch, Director General, of PIOJ, Dr. Wayne Henry, said the IGIF encapsulates critical focus areas, including equality and equity, health, human capital, environmental quality, social protection, safety and security, and wealth.
• "By consolidating indicators relevant to Jamaica into key sub-indices on a composite index, the IGIF provides a comprehensive basis for measurement tracking and in-depth analysis, offering valuable insights for the creation of policy responses and proactive initiatives tailored to our people's diverse needs," Dr. Henry said in a statement.
• He noted that the launch marks a significant milestone in Jamaica’s development, as the PIOJ officially presents a powerful new tool that was created to significantly increase Jamaica’s ability to achieve the goals and targets outlined in Vision 2030, Jamaica’s national development plan, to attain improved economic and social outcomes for all.
• While acknowledging the existence of global indices such as the United Nations Development Programme’s Human Development Index, the IGIF distinguishes itself by being tailored to Jamaica’s specific situation. "It recognises the critical importance of internal nuances in shaping a nation's development path, balancing external benchmarking, with the unique characteristics that make each country distinct," Dr. Henry added.
• The output of the IGIF will serve a wide cross-section of policymakers, economists, researchers, journalists, and all who impact or are impacted by Jamaica’s economy in a detailed, refined, and proactive way.

(Source: JIS)

• Despite recording an 18.6% improvement in its bottom line over the quarter, earnings s declined by more than 50.0% in the nine months to December 2023.
• Revenues over the quarter declined by 2.5% yoy. This was due to the continued decline in revenues from all core services, and contribution from the new service was insufficient to offset the reductions.
• Consolidated expenses for the quarter totaled $476.02Mn compared with $482.86Mn, a decrease of 1.4%. The improvement in expenses was underpinned by lower Administrative expenses, which decreased by 11.8%, a result of the efforts to control expenses. However, the results were tempered by higher selling and Promotions, which rose by 20.5%, reflecting increased support for the services over the comparable three-month period.
• Although certain measures were implemented in the first quarter to control administrative costs for the financial year, there has been a general increase in marketing activity to promote all of the company’s services to improve the pace of growth in sales.
• During the quarter, the company launched its LASCO MoneyGram Direct “Size Matters” campaign. This MoneyGram service will allow the sender to opt for cash pick up at a LASCO agent, for which the receiver is paid at a higher rate of exchange. This campaign will be continued into the coming periods and will be ramped up to achieve certain key objectives.
• However, a combination of higher operating expenses and weak revenues resulted in the sharp falloff in the nine months earnings. Operating expenses were up 7.6% due to higher administrative costs and selling and promotion expenses. This was exacerbated by the 2.9% reduction in revenues over the period.
• LASF’s stock price has increased by 6.3% since the start of the calendar year. The stock closed Monday’s trading session at $2.04 and currently trades at a P/E of 21.9x which is above the Junior Market Financial Sector Average of 18.3x.

(Sources: JSE & NCBCM)

• As previously expected, the Banco Central de Reserva del Peru (BCRP) cut its policy interest rate from 6.50% to 6.25% on February 8.
• Notably, headline inflation has continued its strong decline in January, coming in at 3.0% year-over-year (y-o-y) from 3.2% in December, and 3.6% in November. This puts inflation just at the upper end of the BCRP’s target range (1-3%). 
• While Fitch maintains that inflation will hover around the 3.0% mark through 2024, the agency has lowered its forecast for average inflation slightly from 3.2% to 3.1% and will see headline figures dipping below the upper tolerance band throughout the year. 
• Further to this, Fitch Solutions and the BCRP expect inflation to continue easing next month, and Fitch is currently forecasting a 25 basis point (bps) cut in March.
• Although inflation data has been very auspicious, which may encourage a larger cut, it is believed that the Central Bank will remain relatively cautious.
• Real interest rates remain high for now, and with 12-month inflation expectations falling lower than the 3.0% target, the BCRP is expected to bring the policy rate down to 4.50% by the end of the year.

 (Source: Fitch Solutions)