• Brazil's Economy Ministry on Thursday upgraded its forecast for economic growth this year to 2.7%, from 2% expected in July after official data for the second quarter showed brisk activity.
• The Ministry’s Secretariat for Economic Policy said the upbeat revision comes after GDP growth between April and June surprised expectations with a 1.2% rise. Activity will continue to grow in the second half, though more slowly, it added.
• The ministry kept its GDP growth forecast of 2.5% for 2023. Notably, private economists estimate that Latin America's largest economy will expand 2.39% this year and just 0.5% next year, affected by the central bank's sharp monetary tightening to tame inflation.
• Policymakers have already pushed interest rates to 13.75% from a record low of 2% in March last year. But the ministry again stressed that its much more optimistic prospects for 2023 are supported by greater private investment and historically high capital goods imports in relation to GDP.
• Despite the moderate deceleration expected for global growth, Brazil sees more jobs in the formal sector and increased services with greater productivity. The ministry decreased its 2022 inflation forecast to 6.3% from 7.2% in July; however, for 2023, it was maintained at 4.5%.

(Source: Reuters)

• Peru's economy expanded 1.41% in July compared with the year before, the government said on Thursday, feeling the effects of a slowdown in the key mining sector. The country's economy expanded 3.44% in June.
• The July result brings year-on-year growth between January and July to 3.22% in the world's number 2 copper producer, the national institute of statistics reported. July's growth rate is the slowest since Peru lifted pandemic-related restrictions last year.
• Mining is vital to Peru's economy because it accounts for 60% of the country's total exports. However, this year, Peru's mining sector has suffered from several protests by indigenous communities demanding greater benefits, including one that paralyzed production in the Las Bambas copper mine for almost two months.
• The Minister of Economy and Finance Kurt Burneo has launched a package of measures to reactivate production in the country, which includes subsidies and tax exemptions, increased public spending and cash transfers. This should help to boost growth.

(Source: Reuters)

• The world may be edging toward a global recession as central banks across the world simultaneously hike interest rates to combat persistent inflation, the World Bank said on Thursday.
• The world's three largest economies - the United States, China, and the euro area - have been slowing sharply, and even a "moderate hit to the global economy over the next year could tip it into recession," the bank said in a new study.
• The global economy was now in its steepest slowdown following a post-recession recovery since 1970, and consumer confidence had already dropped more sharply than in the run-up to previous global recessions. World Bank President David Malpass indicated that there are concerns that these trends could persist, with devastating consequences for emerging market and developing economies.
• “Synchronized interest rate hikes underway globally and related policy actions were likely to continue well into next year, but might not be sufficient to bring inflation back down to levels seen before the COVID-19 pandemic,” the bank said.
• Unless supply disruptions and labour-market pressures subsided, the global core inflation rate, excluding energy, could stay at about 5% in 2023, nearly double the five-year average before the pandemic.
• The study suggested that central banks could combat inflation without tipping off a global recession by communicating their policy decisions clearly, while policymakers should put in place credible medium-term fiscal plans and continue to provide targeted relief to vulnerable households.

(Source: Reuters)

• Wall Street banks look set to report better efficiency ratios in the second half of the year, a key metric that deteriorated as global economic gloom sapped income from traditional profit centres and costs surged amid a battle for talent, analysts say.
• A closely-watched measure of performance, the efficiency ratio is calculated by dividing a bank's operating expenses by its revenue. A lower efficiency ratio indicates better performance.
• "Our current projections assume a modest improvement in the banking industry’s efficiency ratio from just under 58% in 2021 to just under 57% in 2022," said Christopher McGratty, Head of U.S. Bank Research at KBW, a Stifel company.
• The expectation of a marginal recovery in the profit metric foreshadows an uptick in overall revenue growth. Even though capital markets activity has slowed dramatically, net interest income growth is accelerating, McGratty said, adding that overall revenue growth should exceed expense growth.
• For the first six months, the efficiency ratio of JPMorgan leaped to 60% while Citigroup's jumped to 66%, both highest since 2014, according to earnings presentations. Analysts widely consider a range between 50% and 60% as optimal for banks, and see rising efficiency ratios as a negative sign.

(Source: Reuters)

• For the first quarter that ended July 31, 2022, both Lumber and Blue Power saw a fall in their respective bottom lines. Lumber saw a decline of 32.7%, while Blue Power saw a decline of 85.1%.
• Lumber’s financial performance was attributed to a 4% decline in its revenues owing to its customer base reacting to uncertain economic conditions, including high-interest rates and a spike in commodity prices for certain key hardware items.
• Meanwhile, though Blue Power saw an 84% increase in its revenues owing to an increase in sales for all its main product categories, its overall profitability was adversely affected by disruptions to its supply chain and the increase in raw material prices.
• Going forward, the outlook for both companies is uncertain as the factors that adversely impacted their financial performances are expected to remain in the near term. Consequently, both companies could underperform in their subsequent quarters for the remainder of 2022.
• Lumber’s stock price has decreased by 3.1% since the start of the calendar year. The stock closed Wednesday’s trading session at $2.93 and currently trades at a P/E of 12.7x which is below the Junior Market Distribution Sector Average of 18.5x. Meanwhile, Blue Power’s stock price has increased by 19.2% since the start of the calendar year. The stock closed Wednesday’s trading session at $3.75 and currently trades at a P/E of 13.9x which is below the Junior Market Manufacturing Sector Average of 16.7x.

(Source: JSE and NCBCM Research)

• Knutsford Express Services Limited reported a turnaround in its bottom-line recording a net profit of $77.83Mn for its financial year ended May 31, 2022, which is a vast improvement from the net loss of $95.98Mn in the prior period last year.
• Travel recovery and removal of mobility restrictions were the main contributing factors to the company’s profitability. Its revenues increased by 76.9% or $484.20Mn, which outpaced the 40.8% or $279.81Mn increase in Administrative and General expenses.
• Prospects for earnings growth for KEX are also favourable. KEX is expected to see a strong first quarter for its FY2022/2023 as Jamaica would have seen a record amount of tourist stopover arrivals which is a key revenue driver for the company. This trend is expected to continue throughout the remainder of 2022 into 2023 and is anticipated to support KEX’s growth. However, we do note that high fuel cost represents a downside risk to KEX’s performance.
• KEX’s stock price has decreased by 15.9% since the start of the calendar year. The stock closed Wednesday’s trading session at $7.00 and currently trades at a P/E of 31.8x which is above the Junior Market Other Average of 20.3x.

(Sources: JSE and NCBCM Research)

• After the Banco Central de Reserva del Perù (BCRP) hiked by 25 basis points at its September 8 meeting, from 6.50% to 6.75%, Fitch now forecasts the central bank will raise its policy rate to 7.00% by end-2022. This is up from Fitch’s previous forecast of 6.75%.
• While this decision was in line with the Agency’s expectations, Fitch now forecasts the BCRP to hike once more at its next meeting in October, rather than ending its hiking cycle in September. Importantly, forward-looking expectations for inflation remain well above the central bank’s 1.0%-3.0% target, and Peru’s growth outlook has become more upbeat, giving the central bank room to tighten monetary policy further.
• While inflation expectations have come in modestly in recent months, lingering supply chain issues and the ongoing Russia-Ukraine conflict will likely prevent inflation from falling more rapidly. Overall, inflation is forecasted to fall from 8.4% y-o-y in August to 7.4% by end-2022. Given that it will remain elevated, it is anticipated that the BCRP will hike further to nudge expectations closer to the inflation target.
• Fitch now expects that the BCRP will opt to keep rates higher in 2023 to reinforce inflation's downward trend towards its inflation target. Inflation will continue to ease by end-2023 to 3.9%, as commodity prices moderate, supply chain pressures ease and base effects become more favourable, prompting the BCRP to begin to lower its policy rate.
• However, risks to Fitch’s interest rate and inflation forecasts remain to the upside, as high inflation, a more aggressive US Federal Reserve and ongoing political uncertainty surrounding President Pedro Castillo could see the BCRP hike further.

(Source: Fitch Solutions)

• The governor of the Central Bank (BCRD), Héctor Valdez Albizu, specified that foreign exchange earnings from tourism reached US$5,759.1Mn in January-August 2022.
• Together with the inflow of US$6,518.8Mn from remittances in the said period, these FX earnings contribute significantly to maintaining a sustainable balance in the current account of the balance of payments and to maintaining exchange rate stability, an essential element for generating certainty in economic agents.
• He added that 31% of foreign direct investment (FDI) in 2021, or some US$960 million, went mainly to the expansion and remodelling of tourism infrastructure. An expected investment value of close to US$1 billion for this concept is anticipated to be made within that sector by the end of 2022.
• Notably, the hotel and restaurant sector has made the most significant contribution to the growth of DR’s economy this year, thus becoming a backbone of the excellent recovery process that the country is experiencing after the pandemic and the effects of the current war in Ukraine.

(Source: Dominican Today)

• Mortgage demand appears to have nowhere to go but down, as interest rates go up. Application volume dropped 1.2% last week compared with the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The week’s results include an adjustment for the observance of Labour Day. Since last year, homebuyers’ demand for mortgages has fallen by nearly a third.
• Mortgage rates, which had been easing slightly through July and August, pushed higher yet again after Federal Reserve Chairman Jerome Powell made it clear to investors that the central bank would stay tough on inflation, even if it caused consumers some pain.
• The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) increased to 6.01% from 5.94% for loans with a 20% down payment.
• Refinance demand fell another 4% for the week and was 83% lower than the same week one year ago. With rates above 6%, only about 452,000 borrowers could benefit from a refinancing, according to Black Knight, a mortgage technology and data provider. That is the lowest number on record.

(Source: CNBC)

• China's central bank is widely expected to pause its monetary easing efforts and keep the medium-term policy rate steady this month, a Reuters survey showed, as widening policy divergence with the Federal Reserve could put further pressure on the Chinese yuan and risk capital outflows.
• The People's Bank of China (PBOC) surprised markets in August by lowering key interest rates to revive credit demand and prop up a slowing economy hurt by COVID-19 shocks.
• But the policy divergence with most other major economies, which are raising interest rates aggressively to combat high inflation, has pressured the yuan, which fell more than 3% against the dollar since mid-August to near the psychologically important ¥7 mark.
• Xie, along with some market traders, noted that inflationary pressures in China were very low by global standards, allowing the PBOC more room to manoeuvre on monetary policy if needed.

(Source: Reuters)