• Mortgage interest rates dropped again last week, hitting the lowest level in two months, but demand for mortgages didn’t respond. Total mortgage application volume fell 1.2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index.
• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.88% from 6.93%. Treasury yields moved lower on softer consumer spending data as consumers are feeling somewhat less upbeat about the economy and job market. This pushed mortgage rates lower, with the 30-year fixed rate decreasing to 6.88%, the lowest rate since mid-December.
• Applications to refinance a home loan, which had been surging through much of January and early February, fell 4% for the week but were 45% higher than the same week one year ago. Last year at this time, mortgage rates were 16 basis points higher. “Although overall refinance application activity remained fairly weak, FHA refinance applications saw an 8.0% increase over the week,” Joel Kan, MBA’s vice president and deputy chief economist added.
• Applications for a mortgage to purchase a home were flat for the week and 3.0% higher than the same week one year ago. The resale market is seeing more supply, partly because homes are sitting on the market longer. While there are more options, prices are not easing much, as inventories are still historically low.

(Source: CNBC)

• An ominous measure that the Federal Reserve considers a near surefire recession signal again has reared its head in the bond market. The 10-year Treasury yield passed below that of the 3-month note in trading Wednesday. This is known as an “inverted yield curve.”
• At the end of January, when the 10-year yield was about 0.31 percentage points clear of the 3-month, the probability was just 23.0%. However, that is almost certain to change as the relationship has shifted dramatically in February. The reason the move is considered a recession indicator is the expectation that the Fed will cut short-term rates in response to an economic retreat in the future.
• Of note, yield curve inversions have had a strong but not perfect forecasting history. In fact, the previous inversion happened in October 2022, and there’s still been no recession 2½ years later. Therefore, while there’s no certainty that growth will turn negative this time around, investors worry that expected growth from an ambitious agenda under President Donald Trump may not happen due to his tariff-focused trade agenda.
• Recent sentiment surveys have reflected consumer and investor angst over prospects that growth could slow under his leadership with inflation perking up just as it appeared to be easing.
• In the University of Michigan’s monthly survey, respondents put their longer-term view on inflation, over the next five years, at its highest level since 1995. On Tuesday, the Conference Board reported that its forward-looking expectations index had sunk back down to levels consistent with recession in February.
• Still, most of the “hard” economic data such as consumer and labour market indicators have held positive even in the face of downbeat sentiment.

(Source: CNBC)

• The Planning Institute of Jamaica (PIOJ) is reporting a growth in financing support to the micro, small and medium-sized enterprise (MSME) sector. Data from the Bank of Jamaica (BOJ) indicate that loans to local business firms increased by 18.5% in 2023 relative to 2022.
• Government initiatives such as the provision of funds to organisations for on-lending, tax incentives and business development programmes, alongside private-sector initiatives, played a crucial role in fostering this growth.
• Addressing the opening ceremony of the Ministry of Industry, Investment and Commerce’s MSME Business Roadshow at the JUICI Empowerment Centre in Clarendon on Thursday (February 20), Director General of the PIOJ, Dr. Wayne Henry, said that growing confidence in and recognition of the impact of the country’s economic performance is driving increased financing of these industries.
• He noted that the sector’s development continues to be guided by the Vision 2030 National Development Plan and the Associated Medium-Term Social Economic Policy Framework 2021-2024.
• Sales from MSMEs increased by 1.2%, reaching a total of $207.40Bn, driven by the strong performance of micro and medium-sized firms in sectors such as electricity and water supply, mining and quarrying, and manufacturing.
• The MSME sector plays a critical role in advancing the fundamental component of Jamaica’s economic structure as they play essential roles in promoting equity, preserving wealth, fostering economic growth, generating employment opportunities, facilitating sustainable development, encouraging employment and expanding the private sector. Furthermore, they contribute about 44% to the country’s GDP and account for 60-70% of all jobs.

(Source: JIS)

• The private-sector arm of the Inter-American Development Bank, IDB Invest, and the Japan International Cooperation Agency (JICA) have announced a US$1Bn contribution from JICA to establish the JICA Trust Fund for Achieving Development in Latin America and the Caribbean (TADAC).
• This initiative, the agency's first private-sector fund with the IDB and its largest private-sector fund in Latin America and the Caribbean, aims to catalyse greater private investment by co-financing projects that drive sustainable growth, a release stated.
• IDB Invest stated that as Latin America and the Caribbean face a growing financing gap, it is adopting an 'originate-to-share' business model. This model emphasises collaboration and co-financing with other development institutions to mobilise private investment and maximise capital efficiency. The TADAC Fund will therefore further strengthen these efforts.
• ‘This US$1Bn fund represents a historic milestone in our ongoing partnership with JICA-the agency's first private-sector fund with the IDB and its largest private-sector fund in Latin America and the Caribbean. By leveraging our combined resources and expertise, we are poised to drive transformative change across Latin America and the Caribbean. This initiative will not only catalyse private investment but also foster sustainable development, innovation, and economic growth in the region,' said IDB President Ilan Goldfajn.
• Dr Akihiko Tanaka, president of JICA, emphasised the importance of this collaboration, stating that 'JICA is committed to supporting private-sector efforts to solve the deep-rooted social issues in Latin America and the Caribbean. This investment in partnership with IDB Invest will contribute to closing the financial gap to achieve the Sustainable Development Goals (SDGs) in the region.'

(Source: Trinidad Express Newspaper)

• Trinidad and Tobago plans to ask U.S. President Donald Trump's administration to extend a license for Shell (Shell), and Trinidad's National Gas Company (NGC) to develop a key gas project in Venezuela, four sources close to the preparations said.
• The U.S. license was first granted in early 2023 as an exemption to Washington's sanctions on Venezuela. It enabled NGC and Shell to move forward on planning and preparation for the Dragon natural gas project off Venezuela's coast, aimed at supplying gas to Trinidad from around 2027. Washington amended the license in 2023 to allow payments in hard currency or in kind to Venezuela and its state-owned oil and natural gas company, PDVSA (Petróleos de Venezuela, S.A.), for gas supplies and extended the expiration date to October 2025.
• U.S. sanctions target the entire Venezuelan oil and gas industry, which is controlled by PDVSA, meaning countries like Trinidad and private operators that abide by the measures require U.S. licenses to export or pay revenue to sanctioned entities including the government, the Central Bank and PDVSA.
• Shell and NGC will, therefore, need an extension to begin production once they make a final investment decision on the project which is expected this year. According to planning by the two companies, Dragon's initial production flow should be around 200 million cubic feet per day, one of the sources said.
• Trinidad's Prime Minister Keith Rowley this month said his government would soon brief Washington on the importance of keeping U.S. licenses to develop gas projects with Venezuela for reasons of regional energy security. He did not elaborate on the planned talks. Both companies have been working closely with Trinidad's Energy Minister Stuart Young and Venezuela's Vice President Delcy Rodriguez, who have separately visited the survey vessel.

(Source: Reuters)

• U.S. consumer confidence deteriorated at its sharpest pace in 3-1/2 years in February while 12-month inflation expectations surged, offering further signs that Americans were growing anxious about the potential negative economic impact of the policies of President Donald Trump's administration. At the same time, consumers' average inflation expectations rose to 6%, the highest since May 2023.
• The Conference Board survey on Tuesday noted that "comments on the current administration and its policies dominated the responses." It followed on the heels of surveys last week showing steep declines in business and consumer sentiment in February. Tariffs on imports, which Trump has already imposed or is planning to impose, have been singled out as the major issue in almost every household and business survey.
• Economists said unprecedented layoffs of federal government workers were also taking a toll on consumers' psyche, which posed a risk to spending, the main engine of the economy.
• The Conference Board's consumer confidence index dropped 7 points, the biggest decline since August 2021, to 98.3 this month. Economists polled by Reuters had forecast the index falling to only 102.5. The third straight monthly decrease pushed the index to the lowest level since June 2024. It is now at the bottom of the range that has prevailed since 2022.
• The Federal Reserve is likely to resume cutting interest rates in June and could reduce short-term borrowing costs again in September, traders bet on Tuesday as they took on board the implications of a widely watched survey that showed consumer confidence dove this month, and inflation expectations surged.

(Source: Reuters)

• The European Central Bank has room to cut its interest rates further if inflation eases to its 2% goal this year as it expects, ECB policymaker Joachim Nagel said on Tuesday, adding the outlook for prices was "encouraging".
• The ECB is widely expected to cut rates for a fifth straight time next week after seeing inflation fall from double digits after Russia's 2022 invasion of Ukraine to just over 2% in recent months. Nagel said incoming data, especially the latest developments on price growth, suggested the ECB was likely to achieve its target this year.
• "This would allow us on the Governing Council to lower the key interest rates further," he said in a speech as he presented the Bundesbank's annual accounts. "Overall...the outlook for prices is fairly encouraging," he added while cautioning about "persistently elevated core inflation and the undiminished strength of services inflation".

(Source: Reuters)

• According to PIOJ, the Jamaican economy is estimated to have contracted by 1.8% for the quarter ended December 2024 (Q4 2024), relative to the corresponding quarter of 2023, reflecting declines in both the Services and the Goods-Producing industries. The estimated out-turn for the review quarter largely reflected the impact of the lingering effects of Hurricane Beryl from the previous quarter, coupled with Tropical Storm Rafael and other hydrological events during the review quarter. Overall, the Goods-Producing Industry is estimated to have contracted by 4.7%, while the Services industry is estimated to have declined by 0.7%.
• During the quarter, all Goods-Producing industries are estimated to have declined, with agriculture being the most significantly impacted, contracting by 12.0%. The outturn was the result of damage to crops, as well as delays in reaping and replanting caused by the series of hydrological events. The industry’s performance was due to lower output in all sub-components of the industry, with the exception of Animal Farming.
• Mining & Quarrying, Manufacturing, and Construction also experienced declines of 3.2%,0.7% and 2.1% respectively. The decline in the Mining & Quarrying industry was due to a fall in the production of alumina and crude bauxite. A contraction in the Other Manufacturing sub-industry, which outweighed the estimated growth in the Food, Beverages, and Tobacco Industry, weighed on the performance of the Manufacturing Industry. This was primarily due to a reduction in the Refinery Service Factor, as the refinery was closed for 39 days during the review quarter, compared to 32 days in the same quarter of 2023. Estimated downturns in both the Building Construction and Other Construction sectors was behind the contraction in Construction.
• The performance of the Services Industry reflects the lower real value added in five of the eight sectors. Producers of Government Services were estimated to have remained unchanged. Among the declining sectors were Electricity & Water Supply, which fell due to lower electricity consumption, Wholesale & Retail Trade; Repair & Installation of Machinery (WRTRIM) due to reduced sales in key sub-categories, and the Hotels & Restaurants industry, which reflects the decrease in stopover arrivals.
• Furthermore, visitor arrivals to the island continue to be negatively impacted by the impact of a fall in airlifts due to supply-side issues with Boeing; two travel advisories issued during 2024; and to a lesser extent, industrial disputes, which halted operations at some hotels.
• Despite two consecutive quarters of economic decline, the PIOJ is maintaining that Jamaica is not in a recession, as a recession cannot be determined solely by GDP. However, significant challenges persist, particularly due to hydrological shocks, which have impacted the Tourism, Electricity & Water Supply, and Agriculture, Forestry & Fishing Industries. Based on the latest available data, the PIOJ is forecasting that the economy will return to positive growth in the January-March 2025 quarter.

(Source: PIOJ)

• Fitch Ratings affirmed Jamaica's Long-Term Foreign-Currency Issuer Default Rating (IDR) at 'BB-'. The ratings reflect stronger governance than the peer median, significant progress with debt reduction, a sound fiscal framework, and a strong political commitment to deliver large primary surpluses. Debt-to-GDP has fallen to a forecast 70.8% in fiscal 2024/2025 from a high of 135.3% of GDP in fiscal 2012/2013.
• However, the ratings remain constrained by deep structural weaknesses, including subdued growth potential owing to a high crime rate, low productivity and weak demographics, and vulnerability to external shocks including weather-related.
• Despite the economic downturn last year caused by Hurricane Beryl and extensive rain in the fall, the overall surplus in the fiscal year ending in March 2025 will be slightly better at 0.3% of GDP than fiscal year 2023/24 at 0.0% of GDP. This is in part due to one-off revenues from insurance payments as well as concession proceeds from airports.
• These large primary surpluses are expected to reduce general government debt GDP to 66.3% of GDP in fiscal year 2025/26 from 70.8% this fiscal year. Debt is expected to fall to 63.5% in fiscal 2026/2027, putting it on track to meet the government's debt target, although the 60% target is still higher than the current 'BB' median of 55.6%.
• Most notably, Jamaica has remained committed to an economic policy framework built on two key pillars: the Bank of Jamaica's (BoJ) inflation-targeting monetary policy and fiscal policy anchored on debt reduction targets. Inflation fell to 5%, the midpoint of the BOJ's target range, at year-end 2024.
• The Rating Outlook is Positive. The Positive Outlook reflects Fitch's expectation of continued improvement in debt metrics and further strengthening of the policy framework over the next few years, including climate risk mitigants.

(Source: Fitch Ratings)

• Peru's gross domestic product (GDP) will likely expand by 4% this year and rank as the second-fastest growing economy in Latin America, as inflation is seen holding for another year at around 2%.
• The Andean economy is bouncing back from recession, with the government of President Dina Boluarte and the central bank forecasting positive prospects for 2025, including fewer inflationary pressures and more investment.
• Peru's economy for decades was one of Latin America's top performers, but in recent years growth has cooled as social unrest hit the country's key mining sector amid growing political instability. At a press conference, Economy Minister, Jose Salardi, pointed to the expectation of relatively high prices for copper and gold - Peru's top mineral exports - and a push to cut regulations that should facilitate investment.
• In Latin America, Peru's expected economic growth this year would be surpassed only by Argentina's likely expansion, according to Salardi. The Economy Ministry also forecasts inflation of 2% this year, after the annual rate of rising consumer prices closed in 2024 at 1.97%. Salardi added that he aims to lower the government's budget deficit, in line with established fiscal rules.
• Peru's debt-to-GDP ratio stands at around 33%. The minister added that the ratio is expected to go down, but did not go into further detail.

(Source: Reuters)