Oil prices rose on Tuesday, April 11 on expectations that inventories in the U.S., the world's biggest crude consumer, are expected to fall and on signs that demand in emerging markets remains healthy. Crude futures likely received a boost from gains in Asian equity markets as regional central banks are expected to keep their interest rates steady.
In March, strong fuel demand in India, the world's third-biggest oil consumer, also supported prices. Last month, fuel consumption jumped by 5% from a year earlier to a record 4.83 million barrels per day. The country continues to be the main destination for Russian Urals crude amid the resorting of global oil trade flows in the wake of the invasion of Ukraine.
Oil futures have climbed more than 5% since the Organization of the Petroleum Exporting Countries (OPEC) and its allies including Russia surprised the market last week with a new round of production cuts starting in May. On the U.S. supply front, industry data on U.S. crude stockpiles are due on Tuesday. Five analysts polled by Reuters estimated on average that crude inventories fell by about 1.3 million barrels in the week to April 7.
Oil prices fell on Monday after rising for three straight weeks, after U.S. jobs data pointed to a tight labour market, heightening expectations of another Federal Reserve rate hike that could curb oil demand.
Rate hike expectations boosted the U.S. dollar index on Monday and Tuesday, which weighed on oil prices as dollar strength makes oil more expensive for other currency holders. Further, a U.S. inflation report to be released on Wednesday could help investors gauge the near-term trajectory for interest rates.
Core inflation in the Eurozone is likely to stay high for the rest of 2023, ECB policymaker Pablo Hernandez de Cos said on Monday, leaving the door open for further interest rate hikes.
Data showed that inflation in the Eurozone dropped by the most on record in March, but growth in core prices accelerated. "Core inflation is expected to remain elevated for the rest of the year. That may delay convergence towards the 2% target in the medium term and that will therefore need close monitoring," De Cos, who also chairs Spain's central bank, told a financial event in Washington, D.C.
Last year, the Eurozone’s core inflation averaged 3.9%, but it reached 5.7% in March, an all-time high. In mid-March, the ECB cut its inflation projections but figures still point to price growth above its 2% target for years to come.
De Cos said that if the ECB's baseline scenario were to be confirmed "we still have ground to cover to make sure that inflation pressures are stamped out." The inflation path in the March staff projections was based on a risk-free forward curve that continued to point to expectations of further interest rate increases.
On Monday, April 10, De Cos said that these projections were subject to uncertainty, which "means we are neither committed to a rise in rates further nor are we finished with hiking rates." The ECB has raised rates by a combined 350 basis points since July but did not provide specific guidance for its May 4 meeting, arguing that turbulence in the financial sector required extra caution. Although recent financial sector tensions have been contained so far, De Cos added that if they persisted or intensified, "a scenario could materialize of significantly tighter credit and financial conditions and worsening confidence, with downward effects on economic activity and prices."
JMMB Group Limited (JMMBGL), the parent company of JMMB Group of companies, carried out a restructuring exercise involving some of its Jamaican member companies effective March 31, 2023. This move comes following JMMB’s receipt of a no-objection response from the Bank of Jamaica to the group’s proposed restructuring.
JMMB indicated that the exercise is part of a wider restructuring exercise being undertaken by the group and was done to ensure its compliance with the Banking Services Act, 2014 (BSA) which requires financial groups to separate financial services companies in the Group from the non-financial companies.
As a result, JMMB Financial Holdings Ltd was incorporated as a new, direct wholly owned subsidiary of JMMB Group Ltd for the purpose of holding, directly and indirectly, the shares of all of the financial services companies within the group. The remaining non-financial Jamaican companies (JMMB Real Estate Holdings Limited and Capital and Credit Securities Limited) are now held under the direct ownership of JMMB Group instead of JMMB Limited.
The statement noted that the restructuring will not impact the group’s operations and services and that JMMBGL will remain listed on the Jamaica Stock Exchange and the Trinidad and Tobago Stock Exchange.
JMMB is the latest financial institution to restructure its organisation to create a financial holding company in order to separate its non-financial subsidiaries. Victoria Mutual Building Society (VMBS) and Cornerstone United Holdings Jamaica (CUHJL) also recently announced similar reorganisation exercises.
In April, the administrators of the digital payment wallet – Lynk – will be launching a new line to its suite of business client services, known as LynkBiz. The facility is a web-based platform that will allow micro, small and medium-sized businesses to accept digital payments seamlessly. These include transactions involving Jamaica’s Central Bank Digital Currency (CBDC) – JAM-DEX – for which Lynk is the first provider.
During his 2023/24 Budget Debate presentation, Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, announced that the Government will be offering $500 million in incentives for businesses signing up to accept JAM-DEX payments, as of April 1, under the Small and Micro Merchant Incentive Programme.
Chief Product Officer for Lynk, John Matthew Sinclair said for the first 10,000 merchants, the Government has made provisions for businesses to receive a $25,000 grant in digital currency.
He pointed out that the provision to small businesses is a different and safer channel to offer goods and services and receive digital payments instantly. “We have over 205,000 users on the platform, to date; so merchants will have access to all those users. You can sell on social media and you can sell in person by simply scanning a QR code,” Mr. Sinclair said.
Lynk app users can easily cash in through NCB ABMs or any local bank using a debit or credit card. Once the money is cashed into a Lynk user’s primary wallet, it can be used at merchant locations and easily changed to JAM-DEX in the app and spent at merchants with JAM-DEX QR codes, so users can earn cash back.
Mexico's annual inflation slowed in March by more than expected to 6.85%, the lowest rate in nearly one and a half years, although core price pressures remained elevated, data from national statistics agency INEGI showed on Wednesday, April 5.
The March reading was the lowest since October 2021 (6.24%), and came in below the consensus forecast of 6.90%, as determined by a Reuters poll. In February, inflation stood at 7.62%.
However, the measure of core inflation, which strips out some volatile items, slowed less than anticipated to 8.09% from 8.29% the previous month. Analysts had forecast a reading of 8.07%. "Core inflation was impacted by the high readings in services, driven by the seasonal increase in airfares, tourism packages, and food services," Goldman Sachs economist Alberto Ramos wrote in a research note.
Notably, Banxico has raised rates by 725 basis points since its rate-hiking cycle started in June 2021 to combat inflation. Month-on-month, Mexico's headline consumer price index rose by 0.27%, less than the 0.31% forecast in the Reuters poll.
The latest data come as leaders of Latin American countries, including Mexico, Chile, Argentina, Brazil, and Colombia, are due to meet virtually to discuss trade measures aimed at combating rising inflation in the region.
The measures to be proposed include "getting rid of tariffs, eliminating red tape for imports, exports, to ensure sufficient supply and fighting shortages," Mexican President Andres Manuel Lopez Obrador said last month.
The new president of the Trinidad and Tobago Manufacturers' Association (TTMA) Roger Roach believes a proposed electricity rate increase could lead to economic fallout and a potential decline in Gross Domestic Product (GDP).
The Regulated Industries Commission (RIC) proposed rate increases for the Trinidad and Tobago Electricity Commission (T&TEC) late last year, which included the widening of tiers of consumption with the introduction of a fourth tier for 1,400 kWh and higher usage.
The proposed new rates would see increases for residential customers ranging from 15%-64%, and hikes of 51%-63%for commercial customers, and are intended to deal with demand management.
The TTMA commissioned an international accounting firm to conduct an impact analysis of the proposed rate hike on manufacturers. They argued that the increase proposed to commercial and industrial customers would have far-reaching consequences given that 100% of costs would be passed down the value chain, and consumers could potentially face a 15% increase in their grocery bills.
The data also indicated that the rate hike could lead to a potential decline in GDP of 0.66%, a potential decrease in non-petroleum exports of 1.63%, and a potential increase in core inflation of 1.16%.
Calls are therefore being made to the government to find other workable solutions to the value-added-tax (VAT) refund problem and the group expressed that what is required is a “meeting of the minds” in order to devise a practical solution going forward.
U.S. private employers hired far fewer workers than expected in March, adding to signs that the labour market was cooling. The ADP National Employment report on Wednesday followed on the heels of government data on Tuesday showing job openings falling below 10 million at the end of February for the first time in nearly two years.
Slowing job growth will be welcomed by Federal Reserve officials as they consider whether to pause the U.S. central bank's fastest interest rate hiking cycle since the 1980s. "While we don't take too much signal from the ADP report, we think that the softness in the ADP data does provide at least some support for our view that the trend for job growth is moderating," said Daniel Silver, an economist at JPMorgan in New York.
Private employment increased by 145,000 jobs last month, the ADP National Employment report showed on Wednesday. Data for February was revised higher to show 261,000 jobs added instead of 242,000 as previously reported. Economists polled by Reuters had forecast private employment increasing by 200,000.
The goods-producing sector added 70,000 jobs, with construction employment increasing by 53,000. But manufacturing payrolls fell by 30,000. There were 75,000 jobs created in the service-providing sector. The leisure and hospitality industry hired 98,000 more workers while trade, transportation and utilities added 56,000 positions. However, there were job losses in the financial activities as well as professional and business services.
The labour market is slowing as higher borrowing costs dampen demand in the economy. The government reported on Tuesday that there were 9.9 million job openings at the end of February. Still, there were 1.7 job openings for every unemployed worker in February, attesting to the labour market's tightness.
Mortgage rates fell last week, but demand for home loans didn’t move higher as a result. Other aspects of today’s housing market are outweighing the benefit of lower mortgage rates right now, namely a lack of supply.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) decreased to 6.40% from 6.45% for loans with a 20% down payment. It had been over 7% just a month ago.
Mortgage applications to purchase a home, however, dropped 4% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. Demand was 35% lower than the same week one year ago.
New listings were down 20% year over year in March, according to Realtor.com, and total inventory was about half of what it was in March 2019, pre-Covid pandemic.
Demand for Federal Housing Administration and Department of Veterans Affairs loans, which are favoured by lower-income borrowers due to low down payment requirements, declined more than those for conventional loans. While there is strong demand from first-time homebuyers, with millennials hitting their peak buying age, affordability is still a challenge right now.
Applications to refinance a home loan also dropped, down 5% for the week and 59% lower than the same week a year ago. Given that rates are 150 basis points higher than they were at the same time last year, there are very few borrowers who can now benefit from refinancing.
The Bank of Jamaica’s Financial Policy Committee (FPC) issued a statement on April 30, 2023, regarding its review of the financial system’s performance for 2022 published in its annual financial stability report.
According to the committee, the Jamaican economy had recovered to its pre-pandemic output levels towards the end of 2022, with real economic activity for the year was estimated to have expanded between 4.5% and 5.5%.This was mainly due to the strong recovery in the tourism and manufacturing sectors. The recovery contributed to improvements in key macroeconomic indicators such as the unemployment rate and public sector indebtedness.
Furthermore, in an effort to stem rising inflation, central banks across the world, including the BOJ, tightened monetary policy in 2022. “Stress tests were carried out on the various financial sub-sectors in order to evaluate their resilience to adverse scenarios involving further increases in interest rates and the spill-over effects of an external recession on the Jamaican economy. The results showed that the financial system remained broadly resilient to these shocks.”, the statement noted.
In addition, the committee indicated that despite the highly interconnected interbank funding network, simulation results suggested a low level of spill-over and contagion risks in response to the recent international bank failures.
Overall, the BOJ's Financial Policy Committee's statement provided a positive outlook on the state of Jamaica's economy and financial system while also acknowledging the need for continued vigilance and proactive measures to maintain stability and promote growth.
The Government has recommitted to increasing the budget for restoration work on the Cornwall Regional Hospital (CRH) in Montego Bay, St. James, to $14.1Bn. Prime Minister, the Most Hon. Andrew Holness, reaffirmed this while addressing journalists following a tour of the Type A facility on Saturday (April 1).
Initially, $5Bn was allocated towards the rehabilitation work, which began in 2019 and was intended to be executed in multiple phases. However, several issues were identified as the project progressed, necessitating the need for further specialized skills and talents to complete the reconstruction process that has now entered phase three.
The Prime Minister assured the public that the completed rehabilitation process will result in a world-class hospital that can rival any hospital globally, and it will likely be the leading hospital in the English-speaking Caribbean. The anticipated completion date for the CRH's rehabilitation is March 2025.
The CRH along with the Western Children and Adolescents Hospital, being built on the compound at a cost of US$43Mn, will offer state-of-the-art services and facilities to the citizens of St. James and, by extension, western Jamaica.
