• For April 2023, the All-Jamaica Consumer Price Index (CPI) decreased by 0.4% when compared to the previous month. Most notably, this pushed the point-to-point inflation rate lower for April, and at 5.8% it is now within the BOJ’s target range of 4.0 to 6.0% for the first time since July 2021.
• For April, the decline in monthly inflation was largely driven by the 4.2% decrease in the index of the ‘Housing, Water, Electricity, Gas and Other Fuels’ division. It was lower due to declining electricity rates. There was also a decline in the index for the ‘Transport’ division which moved down by 0.1%, primarily because of reduced costs of petrol and air travel.
• The inflation rate was, however, tempered by a 0.6% increase in the index for the heaviest weighted division ‘Food and Non-Alcoholic Beverages’. This was due to higher prices for some agricultural produce such as sweet potato, yam, lettuce and tomato.
• The point-to-point inflation rate as of April 2023 was 5.8%. This was influenced mainly by the point-to-point inflation rate for the divisions: ‘Food and Non-Alcoholic Beverages’ (10.3%) and Restaurants and Accommodations Services’ (16.8%). These upward movements were, however, tempered by a 3.1% decline in the index for the group ‘Housing, Water, Electricity, Gas and Other Fuels.’
• On May 19, 2023, the BOJ will host its monetary policy meeting and we anticipate that the bank will continue holding the policy interest rateat 7.0% as inflation continues to abate due to the continued pass-through effects of previous rate hikes and food and energy prices continue to come down.

(Source: STATIN)

• TransJamaica Highway Limited recorded a net profit of US$4.98Mn for the first quarter that ended March 31, 2023. This represents a 639.0% increase in profitability year-over-year.
• Revenue for the quarter was up by 20.9% yoy to U$17.99Mn. This was attributable to the continued improvement in traffic following the lifting of the measures implemented to combat the spread of COVID-19, in addition to the annual increase in Toll Tariff which took effect in July 2022.
• The company incurred operating expenses of US$5.49Mn, reflecting a 43.8% decrease, compared to US$9.75Mn reported for the same period in 2022. This decrease was primarily due to cost savings realized following the acquisition of the toll operator, Jamaica Infrastructure Operator (JIO), and the subsequent reduction in the fixed operation fee. This was however partially offset by higher consultancy fees as the company has undertaken an exercise to restructure its operations, higher marketing costs associated with promoting the usage of ‘my t-Tag’ App, encouraging greater usage of the Tags, as well as higher insurance cost and security maintenance costs.
• TJH’s stock price has increased by 45.7% since the start of the calendar year. The stock closed Tuesday’s trading session at $2.04 and currently trades at a P/E of 19.9x which is above the Main Market Energy, Industrial, and Materials Sector Average of 15.0x.
• TransJamaica will continue to realise cost savings throughout the year as the change in the operating fee structure is expected to significantly reduce operating expenses by more than 50% (approximately US$12 million per annum). Net profit will therefore continue to outperform 2022 for the remainder of the year.

(Sources: JSE and NCBCM Research)

• Although the Caribbean region led the tourism rebound in 2022 and into the first quarter of 2023, achieving just 1% short of pre-pandemic overseas arrivals in the first quarter of 2023, new analyses suggest the region must sustain that attraction as more parts of the world lure travellers.
• An analysis by US travel insurance marketplace Squaremouth shows that eight of the ten most popular international destinations for key markets like the United States and Canada this summer are European countries.
• Additionally, tourism database company ForwardKeys noted the more competitive travel landscape in its recently released Caribbean Travel Trends report, released in conjunction with the Caribbean Hotel and Tourism Association (CHTA).
• The travel landscape is more competitive now that travellers have more choices, and due to pent-up demand for destinations that were previously off-limits or less accessible (South America, Southeast Asia), travellers may opt to visit those destinations this summer. The year 2023 could be considered the first year without COVID-19 for the tourism industry. The Caribbean destinations achieved a leadership position in the last years, now it is time
• Given these factors, the analysis suggested the region should capitalize on high-end Latin American travellers as it represents an exciting opportunity for the Caribbean through its near-shoring effects.
• Additionally, the report noted that Latin American travellers are willing to splurge on premium flight tickets (in particular, Ecuador, Peru, Colombia, Mexico, and Argentina) - and therefore, they are also likely to spend extra on travel services while at the destination which bodes well for the Caribbean tourism market.

(Source: The Nassau Guardian & CHTA)

• The U.S. Treasury Department reiterated Monday that it expects to pay the U.S. government's bills only through June 1 without a debt limit increase, increasing pressure on congressional Republicans and the White House to reach a deal in the coming days.
• In her second letter to Congress in two weeks, Treasury Secretary Janet Yellen confirmed that the agency will be unlikely to meet all U.S. government payment obligations by early June, triggering the first-ever U.S. default. The debt ceiling could become binding by June 1, she said.
• The new date reflects further data on revenues and payments received since Yellen's told Congress on May 1 that the Treasury would likely run out of cash to pay government bills in early June, and potentially as early as June 1. It comes a day before U.S. President Joe Biden is expected to meet House Speaker Kevin McCarthy for talks, and ahead of an overseas trip for the President that starts Wednesday.
• Yellen has repeatedly warned that failure by Congress to raise the $31.4 trillion federal debt limit could spark a "constitutional crisis" and would unleash an "economic and financial catastrophe" for the U.S. and global economies.
• The non-partisan Congressional Budget Office last week said the United States faces a "significant risk" of defaulting on payment obligations within the first two weeks of June without a debt ceiling hike, with payment operations uncertain throughout May. Some analysts, including the Congressional Budget Office, have suggested that Treasury could last as long as August without a default if it can access June 15 quarterly tax payments and new borrowing measures that become available June 30.

(Source: Reuters)

• Total consumer debt hit a fresh new high in the first quarter of 2023, pushing past $17 trillion even amid a sharp pullback in home borrowing. The total for borrowing increased nearly $150 billion, or 0.9% during the January-to-March period, the New York Federal Reserve reported Monday. That took total indebtedness up about $2.9 trillion from the pre-Covid period ended in 2019.
• That increase came even though new mortgage originations, including refinancings, totalled just $323.5 billion, the lowest level since the second quarter of 2014. The total was 35% lower than in the fourth quarter of 2022 and 62% below the same period a year ago. New home loans peaked at $1.22 trillion in the second quarter of 2021 and have been falling since as interest rates have increased. A series of Fed rate cuts helped push 30-year mortgage rates to a low of around 2.65% in January 2021.
• Borrowers had used the previously lower rates both to buy new homes and to refinance, the latter seeing a boom that appears to have ended. “The mortgage refinancing boom is over, but its impact will be seen for decades to come,” Andrew Haughwout, director of household and public policy research at the New York Fed, said in a statement accompanying the report.
• Fed data shows that about 14 million mortgages were refinanced during the pandemic period starting in March 2020. Some 64% were considered “rate refinances,” or homeowners looking to take advantage of lower borrowing costs. Average savings totalled about $220 per month for those borrowers, according to the New York Fed. “As a result of significant equity drawdowns, mortgage borrowers reduced their annual payments by tens of billions of dollars, providing additional funding for spending or pay downs in other debt categories,” Haughwout said.

(Source: CNBC)

• Salada Foods Jamaica Limited (SALF) recorded a net profit attributable to shareholders of $47.51Mn for the second quarter that ended March 31, 2023, marking a 17.8% yoy increase in profitability. However, the company’s bottom line for the six-month period decreased by 8.9% to $74.88n when compared to the same period in 2022.
• Revenues for the quarter rose by 14.0% yoy to $394.22Mn, driven by robust performance and growth across all distribution channels. Despite a 13.9% increase in the cost of sales to $272.13Mn, it was slightly outpaced by revenue growth. Consequently, the gross margin was slightly higher in the March 2023 quarter at 31.0% (March 2022: 30.9%). Revenue for the six months was up yoy by 8.3% to $688.26Mn. This improvement can be attributed to strategic forward purchasing of raw and packaging materials.
• Selling and Promotional expenses for the quarter amounted to $23.22Mn, a 57.7% increase from the $14.72Mn for the corresponding period of the previous year. For the six months, the expenses rose by 7.4% to $75.91Mn. This surge is due to the company’s aggressive support for expansion into new markets, and its pursuit of innovative strategies, product development and diversification. Product diversification is a key strategy to mitigate the ongoing adverse impact of an inconsistent supply of local green coffee beans.
• SALF stock price has decreased by 12.5% since the start of the calendar year. The stock closed Thursday’s trading session at $3.65 and currently trades at a P/E of 22.8x which is above the Main Market Distribution & Manufacturing Sector Average of 14.2x.
• The inconsistent supply of local green coffee beans, a crucial raw ingredient, continues to hinder industrial productivity and operational effectiveness at the company. During the reporting period, Salada partnered with the Jamaica Coffee Growers Association (JCGA) to launch a coffee sustainability initiative “Grounds for Growth”. This initiative focuses on repurposing Salada’s manufacturing bi-products into optimal organic fertilizing material to help improve the quantity and quality of production by local coffee farmers in a cost-effective manner.

(Sources: JSE & NCBCM Research)

• The Central Bank (Banco Central de la Republica Dominicana (BCRD) reported that consumer prices rose by 0.24% month-over-month (M/M), and 5.15% year-over-year (Y/Y) in April, reflecting a decline of 75bps since March and by 449bp from a year ago. Core inflation stood at 0.32% M/M, 5.83% Y/Y, down 33bps from March and 146bp from its May 2022 peak.
• The BCRD projects full convergence to the target range (4% +/- 100bp) during Q2 2023. It reiterated that the declining inflation trend was the result of restrictive monetary policy coupled with targeted subsidies for gasoline and electricity.
• In April, food and non-alcoholic beverages accounted for half of the monthly inflation, while transportation registered deflation. Tradable goods' inflation was 0.20% M/M, while non-tradable items recorded a 0.29% M/M inflation rate.
• The successful disinflation policy suggests that the Central Bank may soon start easing monetary policy. Fitch forecasts that the BCRD will continue to hold interest rates at their current levels until later this year when they are likely to initiate a rate-cutting cycle. Fitch also projects headline inflation to average 5.6% y-o-y in 2023, down from 8.8% y-o-y in 2022, and fall to 4.9% by the end-2023 – just within the BCRD’s target range.
• Additionally, the DR economy is expected to record 3.8% GDP growth in 2023, far below the pre-pandemic average of 6.1% between 2015 and 2019, signalling that elevated rates have had the intended effect on domestic demand.

(Sources: Oppenheimer & Fitch Solutions)

• Ecuadorean President Guillermo Lasso, facing a fresh push to oust him from power, announced on Thursday a proposal to cut tax for middle-income earners and small businesses, but the bill faces long odds due to deepening political instability.
• The conservative former banker submitted the proposal to Congress, where he lacks majority support, using a fast-track procedure that could prompt a vote within 30 days.
• Lasso's tax reform pitch comes as lawmakers prepare to vote on a measure to remove him from office, following allegations that he turned a blind eye to embezzlement, which he denies.
• The tax proposal would benefit some 340,000 taxpayers and reduce revenue to government coffers by about $195Mn, from the $17bn collected in taxes in 2022.
• Lasso stated that the $195Mn would remain in Ecuadorian households for health, education, or food expenses. The tax reform proposal aims to modify changes he proposed to lawmakers at the end of 2021, which increased taxes on individuals who earned more than $2,000 a month by reducing the amount of health, education and other costs they can deduct. Those earlier tax changes became law after the sharply divided Congress deadlocked, allowing them to enter into force without a vote.
• However, the economy ministry described Lasso's new proposal as more "progressive and fair" in a statement. The bill would also introduce a tax on companies involved in sports betting platforms, as well as on the players, plus another levy for and another on organizers of public shows including concerts.

(Source: Reuters)

• The number of Americans filing new unemployment claims jumped to a 1.5-year high last week, pointing to cracks in the labour market as demand slows, potentially giving the Federal Reserve room to halt further interest rate increases next month.
• With demand cooling, inflation pressures are subsiding. Producer prices rebounded modestly in April, leading to the smallest annual increase in wholesale inflation in more than two years, according to data from the Labour Department.
• Economists believe these reports align with the expectation of a recession by the end of the year. "The Fed looks closer to winning the war on inflation today, but it risks losing the war on keeping the economy afloat and away from the shoals of recession," said Christopher Rupkey, Chief Economist at FWDBONDS in New York. Initial claims for state unemployment benefits increased by 22,000 to a seasonally adjusted 264,000 for the week ended May 6, the highest reading since October 2021. Economists polled by Reuters had forecast 245,000 claims for the latest week.
• Economists say claims in a 270,000-300,000 range would signal a deterioration in the labour market. Last week's surge could mark the start of an upward trend as the cumulative and lagged effects of the Fed's rate hikes broaden out in the economy. Layoffs, which were initially concentrated in the technology and housing sectors, appear to be spreading to other industries as companies gear for weak demand.

(Source: Reuters)

• Eurozone consumers raised their inflation expectations in March for the first time since the autumn, even as the rate of price growth fell and the European Central Bank kept raising interest rates, an ECB survey showed on Thursday.
• The median respondent in the latest Consumer Expectation Survey saw prices growing by 5.0% in the coming 12 months, up from 4.6% in the previous survey round in February, the first increase since October.
• Longer-term expectations also increased sharply, with inflation three years ahead seen at 2.9% after a 2.4% reading a month earlier. These rises are an unwelcome development for an ECB that is trying to stop the current high rate of price growth from becoming entrenched. The ECB decided to slow the pace of its interest rate increases last week but signalled more tightening to come in what markets expect to be the final stage of its fight against inflation.

(Source: Reuters)