• The U.S. economy created slightly fewer jobs than expected in August, reflecting a slowing labour market while also clearing the way for the Federal Reserve to lower interest rates later this month.
• Nonfarm payrolls expanded by 142,000 during the month, up from 89,000 in July, but below the 161,000-consensus forecast from Dow Jones, according to a report Friday from the Labour Department’s Bureau of Labour Statistics. At the same time, the unemployment rate ticked down to 4.2%, as expected.
• The labour force expanded by 120,000 for the month, helping push the jobless level down by 0.1 percentage point, though the labour force participation rate held at 62.7%. An alternative measure that includes discouraged workers and those holding part-time jobs for economic reasons edged up to 7.9%, its highest reading since October 2021.
• The household survey, which is used to calculate the unemployment rate and is often more volatile than the survey of establishments, showed employment growth of 168,000. The balance, though, tilted toward part-time employment, which increased by 527,000, while full-time fell by 438,000.
• From a sector standpoint, construction led with 34,000 additional jobs. Other substantial gainers included health care, with 31,000, and social assistance, which saw growth of 13,000. Manufacturing lost 24,000 in the month.
• Markets showed little initial reaction to the data, with stock futures holding negative and Treasury yields also lower. However, stocks sold off later in the session. While the August numbers were close to expectations, the previous two months saw substantial downward revisions. The BLS cut July’s total by 25,000, while June fell to 118,000, a downward revision of 61,000.
• The recent narrative for the economic data has indicated continuing growth but a slowdown for the labour market. Payrolls processing firm ADP reported Thursday that private companies added just 99,000 jobs in August, while outplacement firm Challenger, Gray & Christmas reported that layoffs surged in August and hiring had hit its slowest year-to-date pace going back to at least 2005.

(Source: CNBC)

• The U.S. public's outlook for inflationary pressures changed little last month amid an ongoing retreat in current price pressures, according to a report released on Monday by the New York Federal Reserve.
• In its latest Survey of Consumer Expectations, the regional Fed bank found that in August, respondents saw inflation a year and five years from now at 3% and 2.8%, respectively, unchanged from July. Three years from now, survey respondents expected inflation to be 2.5%, from 2.3% in July. The report also found that the expected change in house prices rose to 3.1% in August from 3% in the prior month.
• With price pressures steadily retreating and risks rising in the job market, the Fed is almost certain next week to cut its benchmark overnight interest rate from the current 5.25%-5.50% range. After the release on Friday of soft hiring data for August, markets are split as to whether the U.S. central bank will cut its policy rate by one quarter or one half of a percentage point, although most traders and investors believe a series of rate cuts will follow.
• Although overall expectations for inflation were mostly steady in August, the New York Fed report found the public expected higher price rises for gas, rent, and medical care, and slower gains in those for food and college.
• The report said respondents viewed the outlook for the labor market as mixed, with expectations of higher income and earnings growth. Spending expectations also increased. The survey also found improved expectations for credit access, although respondents reported a third straight month of increasing expectations of missing a debt payment, with the reading in August at its highest since April 2020.

(Source: Reuters)

• According to data from the Planning Institute of Jamaica (PIOJ), Jamaica’s economy saw a marked slowdown from the 2.7% and 1.9% expansions in Q4 2023 and Q1 2024 respectively to 0.1% in Q2 2024.  The marked slowdown was led by a deceleration in both the goods-producing and services industries.
• The Goods Producing Industry slowed from 1.9% in Q1 2024 to an estimated 0.7% in Q2 2024 with the Agriculture, Forestry and Fishing (AFF) slowing from 7.4% to 2.7% and Mining and Quarrying (M&Q) down from 18.7% to 6.2%. Additionally, the construction sector contracted for the third consecutive quarter, down 3.8% in Q4 2023, 3.7% in Q1 2024 and an estimated 2.4% for Q2 2024. The downturn in the construction industry is largely due to decreased construction activity as high interest rates diminish funding for construction projects.
• The Services Industry decelerated over the last three quarters and slowed from 1.3% in Q1 2024 to 0.1% in Q2 2024. The Q2 2024 slowdown occurred amid lower growth in the Electricity & Water Supply Industry (EWS) from 6.5% to 2.3%. Additionally, the Wholesale & Retail Trade; Repair and Installation of Machinery (WRTRIM) and Transport, Storage & Communication sectors contracted by 0.9% and 0.3% respectively. There was also a slowdown in the Hotels and Restaurants Industry.
• The estimated WRTRIM contraction, is attributable to an estimated 2.4% decline in total Gross Sales in Minerals, Fuels & Lubricants (-4.1%), Other Wholesale & Retail Sales of Goods & Services (-3.1%) and Hardware, Building Supplies, Electrical Goods & Machinery (-8.3%).
• Notably, the Hotels and Restaurants Industry decelerated from a 6.9% growth in Q1 2024 to a marginal increase of 0.1% in Q2 2024. Preliminary data indicates that this may be attributed to a 0.4% decrease in stopover arrivals and a marginal 1.1% increase in visitor spending.
• Looking ahead to Q3 2024, Jamaica's economy is anticipated to contract by -0.1 to -1.0% compared to Q3 2023, due to the effects of Hurricane Beryl. Consequently, the short-term outlook for the overall economy is negative, with expected contractions in the Agriculture, Mining & Quarrying, Electricity & Water, and Hotels & Restaurants industries.
• Amid the anticipated contraction, the Bank of Jamaica (BOJ) implemented its first rate cut, reducing the rate by 25 basis points from 7.00% to 6.75% and signalled that additional rate cuts will depend on incoming data. While the BOJ also expects to see a contraction for Q3 2024, the regulator did not foresee Jamaica falling into recession, which is defined as two consecutive quarters of economic contraction.

 (Source: PIOJ & NCBCM Research)

• Junior Market lighting, electrical and solar energy products distributor Fosrich, announced on September 2, 2024, that it had appointed Mr. Ian McNaughton as Chief Operating Officer. Mr. McNaughton will oversee the daily operations of the stores located throughout the island, among other responsibilities.
• Before joining FosRich Company Limited, he held senior positions in several private sector organizations. The appointment follows the departure of the Operations Manager, Ms. Michelle Thame.
• At the close of trading on September 5, 2024, Fosrich’s stock closed at $2.24. Its P/E of 74.67x is higher than the Jr Market Distribution Average of 19.06x suggesting that the market may have high expectations of future earnings growth. However, year-to-date earnings are down 52.1% to $77.83Mn. A Decline in revenue (280.19Mn; 13.8%), higher administrative expenses ($129.89Mn; 24.7%) and higher Finance Costs ($32.11Mn; 24.7%) were the primary drivers.
• Management noted in its 6-Months 2024 interim report that its results were affected by “the substantial fall in PVC and solar panel cost on the world markets, in addition to the slowness in housing-starts locally, caused primarily by the considerable increase in interest rates in Jamaica in the current period when compared to the prior year.” Furthermore, its performance over the last three quarters also coincides with three consecutive quarters of decline in the construction sector. Fosrich’s financial performance is integrally linked to the demand for construction, particularly housing.
• The construction industry has been burdened by high interest rates for over a year, adversely affecting Fosrich's performance. Although the Bank of Jamaica has initiated rate cuts, it is anticipated that the effects will be gradual and delayed. Consequently, the recovery of the construction industry and housing starts might be protracted, posing additional challenges for the company.

(Source: JSE, Fosrich 6M 2024 Financials & NCBCM Research)

• A Panama Supreme Court decision may allow the building of a new reservoir to supply water to the Panama Canal after facing declining water supplies. Last year, a drought dropped water supplies to critical levels, prompting canal authorities to limit traffic. At the worst point, in December 2023, only 22 ships a day were allowed to pass through the canal, down from the usual 36 to 38. More than 160 ships were stuck at anchor at both ends.
• Rains that began in May allowed the lifting of most restrictions, and in recent weeks, 35 ships passed through the canal on average. However, the concern around declining water levels still lingers in a new era influenced by climate change and frequent periods of El Niño, when ocean temperatures rise and rainfall decreases.
• Notably, during droughts, there is insufficient rainfall for the rivers and streams that supply water to the current reservoir system that fills the locks that transport ships over the terrain.
• A dam envisioned for Río Indio, southwest of Lake Gatún, which forms a major part of the Panama Canal, would create another reservoir that could replenish the canal during droughts. The project would also flood the homes of 2,000 predominantly poor people who would need to be relocated.
• Panama has long desired to construct an additional reservoir to support Lake Gatun; however, a rule implemented in 2006 prevented any expansion beyond the original watershed area. Last month, Panama’s Supreme Court struck down that limitation. The canal authority is now moving ahead with planning for the project, which is expected to take six years and cost US$1.6Bn.
• To proceed with the project, canal authorities are now focused on winning the approval of roughly 12,000 residents residing in about 200 villages in the vicinity. It is exploring places to relocate villages, opening outreach offices in affected communities, and expanding efforts to grow cash crops like coffee to replace livelihoods that will be uprooted.

(Sources: Africa News & The New York Times)

• Finance Minister of Trinidad and Tobago (T&T), Colm Imbert, has issued an order increasing the deposit insurance coverage limit by 60%, raising it from $125,000 to $200,000. The new limit will take effect from October 1. The deposit insurance coverage limit was last increased in 2012 when it moved from $75,000 to $125,000.
• According to the Deposit Insurance Corporation of T&T, the types of accounts covered have not changed. Deposit insurance will remain applicable to savings, chequing, demand, and time deposit accounts held in T&T dollars.
• Coverage continues to remain applicable for single accounts, joint accounts and irrevocable express trust accounts. Foreign currency accounts, however, are not protected by deposit insurance. 
• In addition to the coverage limit increase, Imbert also issued an order increasing the associated premiums on contributing financial institutions. The premium increase levied on member institutions from 0.2% to 0.3% will be staggered over two years, and will also take effect from October 1. This is projected to result in an accumulated incremental increase in premiums levied by the Deposit Insurance Corporation of approximately $95Mn annually.
• The Deposit Insurance Corporation stated that the increases do not mean that there is a problem with member institutions and that it conducts biennial (every other year) reviews which consider the adequacy of deposit insurance protection to ensure adherence to international best practices.
• These best practices include recommendations from the International Monetary Fund (IMF) and the International Association of Deposit Insurers' (IADI).

(Source: Trinidad Express Newspaper)

• The relationship between the 10-year and 2-year Treasury yields briefly normalised Wednesday, reversing a classic recession indicator. Following economic news that showed a sharp decline in job openings and dovish remarks from Atlanta Fed President Raphael Bostic, the benchmark 10-year yield inched above the 2-year for the first time since June 2022.
• The respective yields were both around 3.79% on the session, with just a few thousandths of a percentage point (pp) separating them. An inverted yield curve, where short-term yields are higher than long-term yields, has signalled the most recessions since World War II.
• The reason why shorter-duration yields rose above their longer-duration counterparts is essentially the result of traders pricing in slower growth out into the future. However, a normalization of the curve does not necessarily signal good times ahead. In fact, the curve usually does revert before a recession hits, meaning the U.S. could still be in for some rough economic waters ahead.
• While the market most closely watches the relationship between the 2-year and 10-year yields, the Fed more closely observes the relationship between the 3-month and 10-year. That part of the curve is still steeply inverted, with the difference now at more than 1.3pp.

(Source: CNBC)

• Jamaica’s trade deficit rose from US$1.76Bn in the January to April 2023 period to US$1.80Bn during the same period in 2024. The outturn reflects a fall in exports coupled with a slight increase in imports.
• From January to April 2024, Jamaica's import expenditure reached US$2.45Bn, a 0.5% increase over the same period in 2023. The rise was mainly attributed to a surge in the imports of "Fuels and Lubricants" and "Consumer Goods".
• “Fuels and Lubricants” expenditure totalled US$662.9Mn, 4.2% above the US$636.40Mn spent in a similar period in 2023. Under this category, the main drivers were increases in the imports of ‘‘Other Fuels and Lubricants’ (+4.6%), and ‘Motor Spirits’ (+21.8%).
• Imports of “Consumer Goods” totalled $643.0Mn, 5.5% above the US$609.50Mn recorded in the similar 2023 period, reflecting increases in all sub-categories.
• Revenue from exports amounted to US$647.2Mn for the period, a 4.1% fall from the US$674.6Mn earned in January to April 2023. This was primarily due to a 52.0% decline in the re-export of “Mineral Fuels”.
• From January to April 2024, Jamaica's primary import sources were the USA (38.6%), China (8.8), Brazil (4.4%), Japan (4.2%), and Trinidad and Tobago (3.1%). Import spending on goods from these nations dropped by 6.3% to US$1.45Mn, mainly due to a significant reduction in "Mineral Fuels" from the USA.
• On the export side, the USA (41.7%), Iceland (10.2%), Russia (7.6%), Puerto Rico (5.5%), and Canada (4.8%) were the top five destinations. Export earnings to these countries rose by 2.6% to US$452.60Mn, chiefly because of an increase in alumina exports to Iceland.

(Source: STATIN)

• On Saturday, August 31, 2024, the Minister of Works and Prime Minister, Andrew Holness, announced the launch of the REACH Road Rehab Programme, a comprehensive national road rehabilitation initiative with a budget of $3Bn.
• The program aims to tackle essential road infrastructure requirements throughout the island, concentrating particularly on repairs necessitated by recent weather disturbances, such as Hurricane Beryl, alongside regular road upkeep.
• Under the REACH Road Rehab Programme, each of Jamaica’s 63 constituencies will see funds allocated to conduct essential road repairs and maintenance, ensuring that all regions of the country benefit equitably.
• This initiative reflects the Government's commitment to upgrading national infrastructure and boosting the safety and convenience of Jamaica’s roads. The program will unfold in two phases: the first from September 4, 2024, to November 2024, and the second from January to March 2025.
• During these phases, contractors will be mobilised to repair the most critically damaged roads and conduct necessary maintenance to prevent further deterioration. The National Works Agency will oversee the implementation, ensuring that the highest standards are met and that the work is completed efficiently and within the allocated timeframe.
• Prime Minister Holness expressed confidence in the REACH Road Rehab Programme’s potential to significantly improve road conditions across Jamaica and called on all stakeholders, including local government representatives and community members, to cooperate fully with the execution teams to ensure the programme’s success.

(Source: Office of the Prime Minister)

• On September 3, 2024, policymakers at the Banco Central de Chile (BCCh – Chile Central Bank) unanimously voted to cut its monetary policy interest rate from 5.75% to 5.50%. The cut, which occurred despite a rebound in growth in July’s economic activity index for Chile, was mostly priced in by markets.
• The BCCh implied that with the U.S. Fed’s expected September cut, interest rate differentials are likely to become less of a concern in Chile, as other markets’ central banks also cut. The BCCh also emphasised its worries regarding a sluggish growth trajectory, especially after a weak Q2 2024 growth print.
• Strong economic growth in July (+1.0%, month-over-month; +4.2% year-over-year), which came on the back of disappointing Q2 growth (-0.6% quarter-over-quarter; 1.6% year-over-year) is seen by the BCCh as a one-off. However, given the moderated growth, Fitch Solutions has revised its GDP forecast from 2.7% to 2.5% recently, and the BCCh’s more dovish tone signals that more cuts are to come in the months ahead as ‘spending shows greater weakness.’
• Given the Central Bank’s rate-cut-rationale, economic growth concerns, Fitch has kept its end-of-2024 rate prediction at 5.00%, and its 2025 rate at 4.00%. The forecast from Fitch is based on its belief that the BCCh will prioritise stimulating growth through lowering borrowing costs rather than fighting a resurgence in inflation in the next few months.
• Risks to Fitch’s forecast are balanced and are heavily reliant on Chile’s economic growth trajectory for the next few months.  If growth trends well below projections of 2.3% next year, this will lead to more cuts, perhaps five in 2025, while stronger growth is more likely to lead to only three cuts in 2025.

(Source: Fitch Solutions)