• Oil prices tumbled by just under $3 a barrel on Monday to their lowest in nearly four months, as investors worried that a complicated OPEC+ output decision could lead to higher supplies later in the year, even though demand growth has been slow. Brent crude futures fell by $2.75, or 3.4%, to settle at $78.36 a barrel, closing below $80 for the first time since Feb. 7. U.S. West Texas Intermediate crude futures also closed at a near four-month low of $74.22 a barrel, down by $2.77 or 3.6% from Friday.
• OPEC+ on Sunday agreed to extend most of its oil output cuts into 2025 but left room for voluntary cuts from eight members to be gradually unwound from October onward. Analysts at Goldman Sachs said the outcome was negative for oil prices as the phasing out of voluntary cuts shows a strong desire by several OPEC+ members to bring back output despite recent increases in global oil stocks.
• "The communication of a surprisingly detailed default plan to unwind extra cuts makes it harder to maintain low production if the market turns out softer than bullish OPEC expectations," Goldman Sachs analysts said. Other analysts also called the group's decision incrementally bearish for oil prices in light of high interest rates and rising output from non-OPEC producers like the United States.
• "Ultimately, a combination of factors has come into play," independent oil analyst Gaurav Sharma said, highlighting disappointing economic indicators in the United States and China. "When OPEC+ took the decision it did over the weekend, in a reasonably well-supplied crude market, traders factored in the macro picture alongside a dwindling risk premium (with talk of a ceasefire in Gaza) and went net short," Sharma said.
• Signs of weakening demand growth have also weighed on oil prices in recent months, with data on U.S. fuel consumption in focus. The U.S. government will release estimates of oil stocks and demand on Wednesday, which will show how much gasoline was consumed around the Memorial Day weekend, the start to the U.S. driving season.

(Source: Reuters)

• U.S. manufacturing activity slowed for a second straight month in May as new goods orders dropped by the most in nearly two years, and spending on construction projects slipped unexpectedly the month before, the latest indications that a gradual slowdown in the economy is taking hold.
• The Institute for Supply Management's manufacturing purchasing managers index for May fell to 48.7 from 49.2 in April, the research group said on Monday, noting an increase in references to "softening" among survey respondents. It was both the second straight decline and the second month below the 50 level that separates growth from contraction. Economists polled by Reuters had a median estimate for 49.6.
• Meanwhile, construction spending fell unexpectedly for a second month in April on declines in non-residential activity, although there was an improvement in single-family home building. Together, the two reports pointed to continued sluggishness in the economy as the second quarter began.

 (Source: Reuters)

• Output prices for producers in the Mining and Quarrying industry, a component of the producers' price index (PPI), decreased by 1.1% for April 2024. Another PPI component, the index for the Manufacturing industry increased by 0.4% according to the Statistical Institute of Jamaica (STATIN).
• The movement in the Mining and Quarrying industry was attributed to declines in the indices ‘Bauxite Mining & Alumina Processing’ and ‘Other Mining & Quarrying’ which fell by 1.2% and 0.3%, respectively. This was mainly due to the appreciation of the Jamaican dollar vis-à-vis the United States dollar.
• The increase in the index for the Manufacturing industry was due to the rise in the index for the major group ‘Refined Petroleum Products’ of 2.0%, driven by higher crude prices on the international market.
• For April 2023 – April 2024, the point-to-point index for Mining & Quarrying industry declined by 2.6%. This resulted from a 2.8% fall in the index for the major group ‘Bauxite Mining & Alumina Processing’.
• The point-to-point index for the Manufacturing industry increased by 2.1%. Major groups like ‘Refined Petroleum Products’ (7.9%) ‘Food, Beverages & Tobacco (1.1%)’ and ‘Wood, Wood Products and Furniture’ (10.5%) contributed to this increase. However, these increases were moderated by a 2.1% decline in the index for the major group ‘Chemicals and Chemical Products.’
• 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. Geopolitical tensions in Europe and the Middle East pose risks that could disrupt the oil prices and the supply chain, resulting in higher producer costs.

(Source: STATIN)

• The Planning Institute of Jamaica (PIOJ) says growth prospects for the economy during the April to June 2024 quarter are generally positive. In this regard, the Institute is projecting an out-turn ranging between 1.5% and 2.5% for the period, relative to April to June 2023.
• “Specifically, growth during this period is expected to be driven by the continued strengthening of the mining and quarrying industry due to higher capacity utilisation at alumina refineries, increased domestic demand, due to relatively high levels of employment, and continued strengthening in the global economy, which augurs well for external demand for Jamaica’s goods and services,” said Mr. Stewart.
• Mr. Stewart disclosed that preliminary data for the June 2024 quarter indicate some positive movements that support the projection. For the mining and quarrying industry, he said data for April 2024 indicate that heavier-weighted alumina production increased by 3.7%, while crude bauxite output decreased by 43.7%.
• Additionally, preliminary data on airport arrivals for April 2024 indicate a 4 percentage points decline. The Senior Director explained that this was due to the Easter holiday being celebrated on March 31, 2024, as against April 9, 2023.
• Meanwhile, the PIOJ advised that the growth projection for the fiscal year 2024/25 is within the range of 1% to 3%, with all industries forecasted to expand. The downside risks to these projections include increased factory downtime associated with aged production plants, weather-related shocks, and lower-than-anticipated external demand for Jamaican goods and services as a result of slower-than-expected growth in the economies of Jamaica’s main trading partners

(Source: JIS)

• The Bahamas government has introduced a tax-free US$3.54Bn budget to Parliament, continuing its efforts to enhance the nation’s economic stability and growth.
• Prime Minister Davis highlighted that the estimated revenue for the budget excludes a US$75Mn reimbursement from the Grand Bahama Port Authority (GBPA), noting that the total amount due from the GBPA is US$357Mn. The total expenditure is projected at US$3.61Bn, with recurrent expenditure accounting for US$3.27Bn and capital expenditure for US$344.5Mn.
• The government’s revenue philosophy focuses on lowering the overall tax burden for ordinary Bahamians while improving tax efficiency and enforcement. Consequently, the new budget does not introduce any new taxes but includes adjustments to fees for government services where costs have increased.
• Further, since prioritising tax efficiency, the revenue-to-GDP ratio has increased from 18.7% at the start of the administration’s first term to 20.4% in the 2022-23 fiscal year. The government aims to achieve a medium-term revenue target of at least 25% of GDP.
• The fiscal deficit is estimated at US$69.8Mn, or 0.5% of gross domestic product (GDP), while the primary balance shows a surplus of US$586.9Mn, or 3.9% of GDP. The debt-to-GDP ratio is projected to be 75.3% by the end of the 2024-25 fiscal year.
• Further, Prime Minister Davis announced the official launch of Cloud Bahamas, a new Government Enterprise Resource Planning (ERP) Application designed to modernize public service operations. This ERP system is set to improve financial reporting, including a public sector income statement and balance sheet, and will be fully implemented by January 2025.
• Davis said that the fiscal package prioritizes enhancing the well-being of Bahamians and creating opportunities, increasing revenue from foreign direct investment, addressing Value-Added Tax (VAT) underperformance on real estate transactions, and developing an equitable and competitive business environment. He also shared that supporting new opportunities for Bahamians and incentivising participation in a growing economy remain key policy priorities for the government.

 (Source: Caribbean News Weekly)

• After a soft 0.7% Gross National Product (GNP) growth rate for FY 2023, Fitch Solutions forecast that real GNP will grow by 1.8% in 2024; primarily driven by stronger private consumption and investment growth, supported by resilient US demand.
• Notably, Fitch has revised its FY2024 real GNP forecast (FY2024: July 2023 – June 2024) up from 1.0% previously, to 1.8%, as tailwinds from a resilient US economy continue to support strong growth.
• While the Puerto Rican government has not updated its monthly economic indicator for Puerto Rico beyond December 2023, other high-frequency indicators continue to point to a historically strong labour force which is boosting aggregate household incomes.
• The unemployment rate remains at historic lows of 5.7% as of February 2024, while the labour force participation rate remains strong at 44.5%. Fitch forecasts that the unemployment rate will end FY 2024 at 5.9% and average the same for the entire fiscal year.
• That said, Fitch expects weaker growth in FY 2025, growing only 0.3%, as the momentum in the US economy slows, posing headwinds for the Puerto Rican economy.
• Risks are skewed to weaker growth in H2 2024 particularly due to elevated environmental risks stemming from the start of the hurricane season.

(Source: Fitch Solutions)

• A new round of price cuts by major U.S. retailers and data showing a consumer spending slowdown may boost the Federal Reserve's confidence in falling inflation and take the edge off corporate profits that have grabbed a larger share of national income since the start of the COVID-19 pandemic.
• The Commerce Department reported on Thursday that the U.S. economy grew more slowly than initially thought, expanding at a 1.3% annual rate over the first three months of the year versus an initial estimate of 1.6%.
• Much of the change came from a lowered pace of consumer spending, indicating a core prop of the economy may be slowing in line with Fed officials' expectations. Fresh inflation data will be released on Friday, with economists polled by Reuters expecting the personal consumption expenditures price index to have risen at a 2.7% annual rate in April, matching the gain in March.
• Fed officials have said they feel consumers are in broadly good shape with unemployment low and wages rising. But they've also noted signs of stress among lower-income households, including rising loan default rates and credit card borrowing.
• The price cuts announced this month may show that same sense taking hold in corporate executive suites and touching off the dynamic Fed policymakers expected would eventually take hold: A fight for market share as pandemic-era pricing power wanes, along with the elevated profits that followed it.
• Fed officials in recent weeks have said they think the landscape has shifted, with businesses generally saying their capacity to raise prices is diminished compared to the last two years. In the Fed's most recent "Beige Book" collection of anecdotes about the economy, there was a widespread sense of consumers becoming more selective and putting pressure on firms.

(Source: Reuters)

• Eurozone inflation rose in May, data showed on Friday, in a sign the European Central Bank still faces a slow and uncertain journey to reach its goal of fully reining in prices. The bigger-than-expected increase in inflation is unlikely to stop the ECB from lowering borrowing costs from a record high next week but may cement the case for a pause in July and a slower pace of interest rate reductions in the coming months.
• Consumer prices in the 20 countries that share the euro rose by 2.6% year-on-year in May, inching away from the ECB's 2.0% target after increases of 2.4% in the previous two months, according to Eurostat's flash estimate. Economists polled by Reuters had anticipated inflation would rise to 2.5%, fuelled in part by an unfavourable comparison to last year when Germany had subsidised rail travel, among other one-off factors.
• ECB policymaker Fabio Panetta, the governor of the Bank of Italy, said the latest reading was neither good nor bad as he reaffirmed his view that the central bank could cut rates several times. More significantly, a closely watched measure of underlying inflation that excludes food, energy, alcohol and tobacco came in at 2.9% from 2.7% in April.
• Prices in the services sector, which some policymakers have singled out as especially relevant because they reflect domestic demand, rebounded to 4.1% from 3.7%. This was likely to mirror larger-than-expected wage increases in the first quarter of the year, which have boosted consumers' battered disposable income after years of below-inflation pay hikes.
• Markets are currently pricing around 57 basis points of ECB rate cuts in 2024, indicating a 25-basis point cut in June, and one more by year-end.

(Source: Reuters)

• The Planning Institute of Jamaica (PIOJ) reports that the economy grew by an estimated 1.9% from January to March 2024. Speaking during the PIOJ’s quarterly briefing on Tuesday (May 28), Senior Director of the Economic Planning and Research Division, James Stewart, said the outturn represents the 12th consecutive quarter of growth.
• The performance for the review period largely reflected increased external demand, higher levels of business and consumer confidence, increased agricultural output, and continued expansion in capacity utilisation at alumina refineries.
• Stewart indicated that a contraction in the construction industry tempered further economic growth. Regarding real-sector developments, the goods-producing industry grew by an estimated 3.0%, driven by improved performances in three of the four industries – agriculture, forestry and fishing, mining and quarrying, and manufacturing.
• He highlighted that the output of the agriculture, forestry and fishing industry was estimated to have increased by 7.7%. The industry’s performance reflected favourable weather conditions, facilitated by higher production levels, relative to the corresponding quarter of 2023 when drought conditions impacted the industry.
• The mining and quarrying sector was estimated to have grown by 24.8% due to increased alumina and crude bauxite output. Regarding manufacturing, Mr. Stewart advised that the industry grew by 2.0%, due to estimated growth in the ‘Food, Beverages and Tobacco’ and ‘Other Manufacturing’ sub-industries.
• Meanwhile, real value added for the construction industry fell by 4.5%, reflecting a downturn in the ‘Building Construction’ component, which outweighed an estimated growth in the ‘Other Construction’ component.

• The Development Bank of Jamaica Limited (DBJ) plans to intensify efforts to provide support for the divestment of government-owned assets during the fiscal year 2024/25, primarily by facilitating private investment through the transparent execution of Public-Private Partnerships (P4) and privatisations.
• Details of the programmed engagements are outlined in the Jamaica Public Bodies Estimates of Revenue and Expenditure for the Fiscal Year ending March 2025. Emphasis will be placed on expediting transaction management and execution processes to ensure effectiveness and efficiency.
• The DBJ will systematically implement supplementary initiatives in line with its mandate, encompassing policy development, capacity building, and strategic monitoring of the programme. Several privatisation initiatives are currently underway or in the planning stages. These ventures include Braco Village Resorts, Jamaica Mortgage Bank, Montpelier (Agriculture Lands), White Marl Complex, Nutrition Products Limited, and the Agriculture Marketing Corporation.
• Additionally, there are prospects in the P4 category, such as the Soapberry Wastewater Treatment Plant and National Solid Waste Management projects. The entity also plans to enhance the micro, small, and medium-sized enterprises (MSME) ecosystem by providing essential offerings such as credit guarantees, debt financing, equity financing, and institutional capacity building.
• This multifaceted strategy aims to boost business development and alleviate concerns regarding access to finance that currently impede the growth of the Micro, Small and Medium-size Enterprises (MSME) industry. The Bank’s efforts are expected to attract investments totalling approximately J$40.9 billion, with loan disbursements reaching some J$9.2 billion.
• The entity also plans to enhance the micro, small, and medium-sized enterprises (MSME) ecosystem by providing essential offerings such as credit guarantees, debt financing, equity financing, and institutional capacity building. This multifaceted strategy aims to boost business development and alleviate concerns regarding access to finance that currently impede the growth of the Micro, Small, and Medium-size Enterprises (MSME) industry. To strengthen these initiatives, the DBJ plans to provide both loans and capacity-building support.

(Source: JIS)