• The average price paid for goods and services by Jamaican consumers decreased in April 2024, as reflected in a 0.7% decline in the All-Jamaica Consumer Price Index (CPI). The decrease was influenced by a downward movement in the index for the ‘Housing, Water, Electricity, Gas and Other Fuels’ division (2.3%) as a result of lower electricity, water and sewage rates.
• Also contributing to the fall in the inflation rate was a 0.6% fall in the heaviest weighted index, the ‘Food and Non-Alcoholic Beverages’ division. The index for the ‘Food’ group declined by 0.7%, while the index for the ‘Non-Alcoholic Beverages’ group rose by 0.4%. The fall in the index for the ’Food’ group was mainly influenced by a 3.7% decline in the index for the class ‘Vegetables, tubers, plantains, cooking bananas and pulses’ due to lower prices for agricultural produce such as carrot, tomato, Irish potato, sweet potato, and yellow yam.
• The decline in the index for the group ‘Food’ was, however, moderated by a 0.5% increase in the index of the class ‘Cereal and cereal products’, largely influenced by higher prices for rice. Additionally, the index for the ‘Transport’ division fell by 0.6%, reflecting the decline in the index for the class ‘Passenger Transport Services’.
• The point-to-point inflation rate (April 2023 – April 2024) was 5.3%. This was 0.3 percentage points lower than the inflation rate for the period March 2023 to March 2024. The main contributors were the divisions; ‘Food and Non-Alcoholic Beverages’ (5.3%), ‘Transport’ (9.5%) and ‘Housing, Water, Electricity, Gas and Other Fuels’ (5.0%). For the calendar year-to-date, the inflation rate was -1.8%.
• At its last monetary policy meeting in March, the BOJ kept the policy rate at 7.00% as it continued to monitor the pass-through effects of previous adjustments on deposit and loan rates. The next policy decision will be on the 20th of May, when it is expected that BOJ will maintain its policy rate at 7.00%.
• While inflation has fallen over the last three months, farmers are still grappling with drought conditions. If these conditions persist, it may put upward pressure on food prices, the largest factor in the CPI basket.

(Sources: STATIN & NCBCM Research)

• Brazil's economy exhibited a higher-than-expected contraction in March but still managed to clinch a positive performance in the first quarter, central bank data showed on Wednesday.
• The country's IBC-Br economic activity index, considered a leading indicator of gross domestic product (GDP), posted a seasonally adjusted growth of 1.08% in the first quarter.
• The quarterly performance followed a 0.34% decrease in March from the previous month, compared with a 0.25% drop expected by economists polled by Reuters. On a non-seasonally adjusted basis, the IBC-Br index fell by 2.18% over March 2023 but increased by 1.68% in the 12-month period.
• Brazil, Latin America's largest economy has been propelled by increased household consumption amid rising disposable income under policies of larger welfare cash handouts and real minimum wage gains implemented by leftist President Luiz Inacio Lula da Silva. This backdrop is also supported by a robust labour market, which has been driving growth in the service sector.
• However, GDP is expected to slow down compared to last year's growth of 2.9%. While the government officially projects a 2.2% expansion for the economy this year, economists surveyed weekly by the central bank forecast a slightly lower rise of 2.09%.
• The lower expectation largely reflects uncertainties regarding how the historic flooding in Brazil's southernmost state of Rio Grande do Sul, which caused widespread destruction and displaced over half a million people, will impact economic activity.

(Source: Reuters)

• Fitch Solutions forecast that the Dominican Republic will experience accelerating real GDP growth from 2.4% (est. 2.5%) in 2023 to 3.8% (prev. forecast 3.4%) in 2024 as tailwinds from resilient US demand will support export and private consumption growth. Strength in export-facing sectors will support the labour market, boosting household incomes and consumption.
• Further, Fitch is revising its 2023 current account deficit forecast upwards from 4.2% of GDP to 1.3% for the Dominican Republic. In 2024, the deficit will widen slightly to 1.4%. A larger goods trade surplus, a stronger performance for the tourism sector and resilience in remittance inflows are behind Fitch’s more optimistic view for 2023.
• After revising the Dominican Republic’s 2023 budget deficit forecast from an estimated 3.4% of GDP to 2.4%, the company forecasts the deficit will marginally widen to 2.8% in 2024. Risks are skewed toward a wider deficit, considering the Dominican Republic may experience natural disasters and fluctuating energy prices that could raise government expenditure and lower consumption growth.
• Additionally, Fitch believes that the incumbent president of the Dominican Republic, Luis Abinader will win a second term comfortably, while his Partido Revolucionario Moderno (PRM; English Translation: Modern Revolutionary Party) and their allies are likely to increase their share of seats in congress. With a strong mandate, Fitch expects broad policy continuity with a relatively pro-business and pro-market economic policy.

(Source: Fitch Solutions)

• U. S. consumer prices increased less than expected in April, suggesting that inflation resumed its downward trend at the start of the second quarter in a boost to financial market expectations for a September interest rate cut. The hope that the Federal Reserve would start its easing cycle this year was further bolstered by other data on Wednesday, which showed that retail sales were unexpectedly flat last month.
• The reports suggested that domestic demand was cooling, which will be welcomed by officials at the U.S. central bank as they try to engineer a "soft-landing" for the economy.
• The consumer price index rose 0.3% last month after advancing 0.4% in March and February, the Labor Department's Bureau of Labor Statistics said. The higher cost of living has detracted from the economy's resilience and is a campaign theme for the Nov. 5 presidential election.
• President Joe Biden said prices were still too high but argued that his agenda, which includes building two million homes and taking on Big Pharma to lower prescription drug prices, "will give families breathing room." Donald Trump's campaign blamed inflation on the Biden administration's policies and touted the former president's America First agenda of low taxes, lower prices, and higher wages.
• Inflation accelerated in the first quarter amid strong domestic demand after moderating for much of last year. Last month's slowdown was a relief after data on Tuesday showed a jump in producer prices in April. Inflation is being driven by providers of services like motor vehicle insurance, housing, and healthcare catching up to higher costs.
• Economists expect price pressures to ebb this quarter and inflation to gradually move toward the Fed's 2% target as the labor market is cooling. On Tuesday, Fed Chair Jerome Powell said, "I expect that inflation will move back down ... on a monthly basis to levels that were more like the lower readings that we were having last year."
• Financial markets saw a roughly 73% probability of a rate cut in September, up from 69% before the data. A few economists anticipate the Fed will start lowering borrowing costs in July.

(Source: Reuters)

• Utility price hikes in over 10 Chinese cities may temporarily boost inflation but could ultimately lead to deflation by reducing household spending power. Boosting household demand is crucial to avoid prolonged low growth and deflation, but policies to shift economic resources to consumers are difficult for debt-laden local governments. Cities like Shenzhen and Guangzhou have raised water or gas prices, and high-speed railway tickets are also set to increase.
• These hikes have sparked social media criticism as people expect to have less to spend on basic needs. While price hikes might keep inflation positive in the short term, the effect will fade after a year, leaving negative impacts on demand. ANZ strategist Xing Zhaopeng notes that higher living costs will hit household sentiment, likely reducing domestic consumption.
• New water prices in cities like Guangzhou and Shanghai have risen 10%-50%, and gas prices in cities like Chengdu and Shenzhen have increased 5%-20%. These increases come from a low base as cities have long subsidized utilities. From 2016 to 2021, annual increases in gas, water, and heating bills were 2.4%, 0.8%, and 0.2%, respectively. China has avoided the sharp utility price spikes seen in Europe post-Ukraine invasion due to subsidies.
• However, cities are cutting spending as real estate downturns limit land lease revenue, a significant income source pre-pandemic. Land auction revenues in 2023 were about 20% below 2019 levels. Wang Dan, chief economist at Hang Seng Bank China, expects more price increases due to insufficient local government revenues to pay subsidies.
• Despite rising costs, Xu Tianchen of the Economist Intelligence Unit notes they start from a small base, potentially leading lower-income groups to reduce wasteful consumption. ANZ estimates utility costs account for 7.7% of China’s consumer price inflation basket, with a minimal overall impact on this year’s inflation, maintaining a 0.7% end-year forecast. China has faced deflation for over a year, with a 0.3% year-on-year consumer price rise in April, partly due to higher utility prices. Recent hikes are not intended to boost inflation but may lead to economic stagnation and exacerbate deflation.

(Source: Reuters)

• The Jamaica Central Securities Depository (JCSD) subsidiary of the Jamaica Stock Exchange, in association with the Tax Administration Jamaica (TAJ) and the Jamaica Securities Dealers Association (JSDA) recently launched a withholding tax certification solution for retail, non-prescribed investors. The solution gives easier access to withholding tax certificates on the TAJ RAIS platform allowing bondholders to reclaim withholding tax on interest paid.
• Previously, retail bondholders couldn’t re-coup tax on interest paid on bonds from the secondary market, while Prescribed institutional Investors could. Additionally, retail investors paid gross interest to acquire the bond. The solution will now enable retail investors to pay net of withholding tax.
• This development will reduce the purchase costs of bonds for retail investors, while also reducing the need for brokers to absorb the costs of withholding tax from investors who cannot reclaim withholding taxes paid on purchases made on the secondary market. This solution applies to bonds under the management of the JCSD and JCSDTS.

(Source: JSE)

• Jamaica continues to fortify its position as a responsible player in the global financial landscape, with the recent launch of the Online Beneficial Ownership Training (OBOT) programme.
• Developed in collaboration with the Ministry of Industry, Investment and Commerce (MIIC), Companies Office of Jamaica (COJ) and local educational company One-on-One, the platform possesses key features, such as a user-friendly interface, engaging multimedia content, customised learning paths, and real-time progress tracking.
• Speaking at the launch, held at the Courtyard by Marriott in Kingston on May 7, Industry Minister, Senator the Hon. Aubyn Hill, said that the MIIC is actively engaged in implementing measures such as this, to enhance beneficial ownership transparency.
• In this, he explained that the online platform was “developed to facilitate seamless and efficient training on beneficial ownership information”. It comprises six modules, each containing one to three units that cover various aspects of the beneficial ownership regime.
• The beneficial ownership requirements in the Companies Act were recently revised to meet the international standards set by the Financial Action Task Force (FATF). As such, the platform was designed to provide much-needed information on beneficial ownership to the public in order for them to understand and eventually adhere to the new requirements.
• Senator Hill further emphasised the importance of strengthening beneficial ownership transparency as a cornerstone of Jamaica’s efforts to combat financial crime, uphold the rule of law and promote sustainable economic development.
• “When we strengthen Jamaica’s beneficial ownership regime, along with providing companies with appropriate resources, we can help to meet Financial Action Task Force (FATF) requirements and demonstrate commitment to responsible global financial practices,” he pointed out.

(Sources: JIS & NCBCM Research)

• The Bahamas is forecasting that foreign air stopover arrivals will break the two million mark for the first time in 2024 after more than 500,000 visitors landed during the year’s first quarter.
• The Ministry of Tourism, Investments and Aviation disclosed that foreign air arrivals for the first three months of 2024, which included the peak winter tourism season and most of the Easter weekend, totalled 504,000 for a 7.3% year-over-year increase. Based on this performance, the statement said: “End-of-year foreign air arrivals numbers are forecasted to exceed two million.”
• The expectation for 2Mn arrivals would represent a 17.6% year-over-year increase on the 1.7Mn air arrivals that visited The Bahamas in 2023. Stopover arrivals are especially important to the tourism industry and the wider economy because they represent the highest-yielding visitor segment, with spending that is typically 28 times greater than that of the average cruise passenger.
• This data was released as Southwest Airlines disclosed that its new daily non-stop flights will connect Orlando with Nassau at the height of the summer months. The Orlando to Nassau flights will operate from June 4 to August 4.
• “The expansion of Southwest Airlines’ central Florida route map to include a new daily service to Nassau is another testimony to the Government’s efforts and commitment to grow air stopover arrivals throughout our 16-island destination aggressively,” said  Chester Cooper, Deputy Prime Minister and Minister of Tourism, Investments and Aviation. “We have been very strategic about driving and expanding strategic partnerships with airlines and our local and international industry partners, including our Promotion Boards and hotel partners”
• “Part of our expansion includes an ongoing growth strategy in our southern,  central and northern Florida source market, including Orlando, West Palm Beach and Tampa, to attract new airlift to Nassau/Paradise Island, Grand Bahama and our Family Islands.”, Cooper said.

(Source: The Tribune)

• Struck by the worst drought in five decades, Costa Rica announced an electricity rationing plan on Thursday, May 9, blaming a severe lack of rainfall that has hobbled hydroelectric plants.
• The Central American nation, famed for its beaches and lush landscapes that power ecotourism normally gets about 70% of its electricity supply from the plants. State-run electricity company ICE (Instituto Costarricense de Electricidad; English: Costa Rican Institute of Electricity) has blamed the drought conditions partly on the weather phenomenon known as El Nino.
• Roberto Quiros, ICE's electricity director, described water levels at main reservoirs as "critical," adding the current El Nino is the most severe on record. He also pointed to delays in contracted deliveries from private power plants.
• The country last saw electricity rationing in 2007. The power cuts, implemented on Monday, May 13, are scheduled to last up to three hours daily but will not affect hospitals, industry or other high-voltage customers.
• ICE is also asking residential users to reduce consumption as much as possible. Widespread power cuts blamed on a heat wave also hit Mexico earlier this week, in addition to similar problems in Colombia and Ecuador.

 (Source: Reuters)

• The first of three inflation reports this week, the April producer price index (PPI), surprised to the upside, with both the headline and core rising 0.5% on the month, although there were downward revisions to some prior months.
• Energy was up notably on the month (2.0%), broadly as expected, while food unexpectedly contracted on the month (-0.7%). Excluding food and energy, today’s core reading was the firmest since last July.
• On a year-over-year basis, headline PPI inflation firmed to 2.2%, while core PPI inflation held steady at 2.4%. Within the core, final demand services rose 0.6% in April, while final demand goods were up 0.3%—both firmer than anticipated—whereas construction rose a softer-than-expected 0.1%.
• Some “pipeline pressures” can show up in PPI first and then gradually translate into consumer prices over time; likely more relevant in the near term are broad macro dynamics that suggest some cooling in an economy that is still running above potential and with a still tight labour market.
• Some PPI measures do feed directly into core PCE tracking estimates; …financial services were strong, while airfares point to a contraction; and medical costs were moderate overall.

(Source: JPMorgan)