U.S. business activity approached the stagnation point in August, with growth at its weakest since February as demand for new business in the vast service sector contracted.
S&P Global said its flash U.S. Composite PMI index, which tracks manufacturing and service sectors, fell to a reading of 50.4 in August from 52 in July, the biggest drop since November 2022. While August's reading was the seventh straight month of growth, it was only fractionally above the 50 level separating expansion and contraction as demand weakened for both manufactured goods and services.
For months, a strong labour market and resilient consumer spending have increasingly assuaged fears of recession and led to upward revisions of GDP growth forecasts. However, Wednesday's data painted a more tepid picture of the economy.
Service sector business activity growth was the slowest since February at 51.0 in August, and the Manufacturing PMI fell deeper into contraction territory at 47.0 down from 49.0 in July, the fourth straight month of contraction.
Consumer demand posed a substantial drag on revenue for firms, as new business and orders contracted for firms across all sectors. New business in the service sector declined for the first time in six months, falling to 49.2 from 51.0 the month prior.
Both manufacturing and service sector businesses tamed price hikes to attract more customers and slowed headcount growth to compensate for resurgent input costs.
Britain's economy is slowing and might be heading for a recession as it feels the impact of 14 back-to-back interest rate increases by the Bank of England to fight high inflation.
Despite being buffeted by Brexit, the COVID-19 pandemic and last year's surge in energy prices, the British economy has defied forecasts of contraction so far this year, but signs of a slowdown are mounting, highlighting the BoE's dilemma as it continues to grapple with inflation.
A survey published on Wednesday showed activity among businesses shrank by the most since January 2021, when Britain was still in a coronavirus lockdown.
The housing market is weakening and the jobless rate is up, but the BoE looks set to keep on raising rates with inflation still more than three times its 2% target. Core inflation in July held close to its highest in more than 30 years.
Most worrying for Governor Andrew Bailey and his colleagues, pay growth is at its fastest since at least 2001, raising the risk of persistently high inflation.
Jamaica is estimated to have recorded gross domestic product (GDP) growth of 2.9% for the first six months of 2023. Director General, of the Planning Institute of Jamaica (PIOJ), Dr. Wayne Henry, made the disclosure during the agency’s digital press conference on Thursday (August 17).
He informed that the Services Industry grew by 3.5%, while the Goods Producing Industry expanded by 1%. The industries that were estimated to have recorded the largest increases during the first half of the year were Mining and Quarrying, up 137.7%; Hotels and Restaurants, up 18.5%; Other Services, up 11.4%; and Transport, Storage and Communication, up 6.1%.
He noted that the short-term prospects for the overall economy are positive, based on expected improved performances in the abovementioned industries and informed that there is also anticipated strengthening in business confidence, which is based on firms’ perception that business conditions will improve. This, he outlined is expected to drive demand.
The short-term prospects are also based on the continued recovery of the global economy, which augurs well for external demand. This is supported by recent projections from the International Monetary Fund (IMF) indicating a strengthening in global growth for 2023.
However, this positive outlook could be significantly impacted by adverse weather conditions, including drought and heavy rainfall; plant downtime, due to relatively aged equipment in major industries, particularly in the manufacturing industry; and slower than expected growth in the economies of Jamaica’s main trading partners.
Adoption of the Blue Ocean Strategy has the potential to revolutionize Jamaica’s tourism industry in ways that will differentiate the island from its regional competitors, says Minister of Tourism, Hon. Edmund Bartlett.
The implementation of the strategy will not only stimulate economic growth by attracting new investments and increasing visitor spending but will, in turn, create employment opportunities across various sectors.
The Blue Ocean Strategy, developed by Professors W. Chan Kim and Renée Mauborgne, suggests that businesses can achieve remarkable success by identifying and capturing untapped market spaces, termed ‘blue oceans’. These blue oceans represent areas where competition is low or nonexistent, allowing businesses to create and capture new demand by focusing on differentiation and innovation rather than competing in overcrowded market spaces.
By targeting new customer segments, the Tourism Ministry aims to identify untapped markets, such as adventure tourism, wellness tourism, and eco-tourism, to attract a diverse set of travellers with varied interests, noting that by catering to niche segments and developing tailored experiences, Jamaica can meet the evolving demands of modern travellers. By pursuing strategic partnerships, the Tourism Ministry also plans to foster collaborations between the public and private sectors, local communities and international stakeholders.
Bartlett added that future trajectory would support the Government’s aim to break away from traditional tourism approaches and create untapped market spaces, allowing the country to thrive in an era of increased global competition.
The CARICOM Development Fund (CDF) and the African Export-Import Bank (Afreximbank) have signed a Memorandum of Understanding (MoU) to provide a framework for cooperation between the two organisations and assist with delivering services to the CARICOM Member States.
Through the MoU, the CDF and Afreximbank have pledged to collaborate and explore the best possible funding options from debt and equity capital markets to support the development of critical infrastructure projects in the CARICOM region. The MoU is a clear indication of the collective effort of both organisations to increase financing opportunities for CARICOM Member States and strengthen south-south cooperation between the African continent and the Caribbean region.
Reflecting on the MoU, the CEO of the CDF, Mr. Rodinald R. Soomer said the Barbados-based CDF is keen to work with Afreximbank to facilitate the creation of new and exciting trade and investment opportunities for the private sector in the CARICOM region. He also urged regional small- and medium-sized enterprises (SMEs) to take advantage of the generous capacity-building assistance offered by the bank, which can help them to scale up and expand their businesses.
‘As a recently established shareholder of Afreximbank, the CDF stands in partnership with the bank to assist with its newly minted regional operations. Specifically, we aim to do so by collaborating on transactions and projects that are aligned with the strategic objectives of the Africa-Caribbean Trade Initiative and by supporting client awareness of the services that will be offered to the Caribbean private sector to enable them to do business with Africa. This partnership and commitment of the CDF’s support are affirmed through the signing of the MoU between CDF and Afreximbank’, stated CEO Soomer.
In December 2022, the Board of Directors of Afreximbank approved funding worth 1.5 billion USD to aid CARICOM Member States in accessing the bank’s financing instruments. This funding will support SMEs and various economic sectors, such as renewable energy, tourism, and agriculture.
The head of an influential European business lobby in China said Beijing needs to send a clear message on how it plans to revive its economy and provide clarity on a national security crackdown that is unnerving the foreign business community.
The world's second-largest economy grew at a frail pace in the second quarter, prompting top leaders to promise further policy support and analysts to downgrade their growth forecasts for the year. "There is this doubt about where China is going, so I think it is a matter of urgency to go out and address these uncertainties," Jens Eskelund, President of the European Chamber of Commerce in China, told Reuters.
"The next few months, we believe, would be quite important in terms of rebuilding confidence in the future trajectory of China," he added during an interview at the group's Beijing headquarters on Monday.
The sluggish growth also has coincided with increasing state intervention in the private sector in recent years, with crackdowns on the tech, education, health and due diligence sectors and increased scrutiny of foreign business links. At the same time, leaders have vowed more support for embattled private entrepreneurs and called for more overseas investment, but confidence remains low.
Eskelund, who is also Chief Representative for Danish shipping giant Maersk in Greater China and Northeast Asia, added that while he believes a recession is unlikely, Beijing should prioritise boosting consumption, as well as providing more clarity on ambiguous legislation such as a sweeping anti-espionage law that has dented foreign business confidence. "Our recommendation to the government is really to try to establish the highest possible level of clarity on these issues that would give us firm guardrails that we know to stay within," he said.
S&P Global Ratings is downgrading the credit ratings of five banks, including some of the nation's largest lenders: Associated Banc Corp; Comerica Inc.; KeyCorp; UMB Financial Corp.; and Valley National Bancorp.
The credit agency pointed to "tough operating conditions" that are straining the banking industry and also lowered its rating for two other banks. In explaining its rationale for the downgrades, S&P noted in a report on Monday that banks are facing risks that could make them "less resilient than similarly rated peers."
The move comes only two weeks after Moody's cut the credit ratings of 10 small and midsize banks because of growing financial risks and strains that could erode their profitability. Both credit ratings agencies are taking the steps in the wake of a banking crisis that began in March when Silicon Valley Bank, once the country's 16th largest bank, collapsed just days after depositors grew fearful of its solvency and made a classic bank run.
Underpinning the banking downgrades is a drastically changed lending environment compared with early 2022 before the Federal Reserve began driving up interest rates to fight high inflation. Today's higher borrowing costs mean that banks must pay more interest to depositors, while the value of some bond assets has slumped.
"The sharp rise in interest rates and quantitative tightening deployed since March 2022 to combat high inflation are weighing on many U.S. banks' funding, liquidity and spread income," S&P said in its report. "These factors have also caused the value of banks' assets to fall and raised the odds of asset quality deterioration."
At its meetings on the 16th and 17th of August 2023, the Monetary Policy Committee (MPC) opted to maintain the policy interest rate (the rate offered to DTIs on overnight placements) at 7.0% and continue to maintain relative stability in the foreign exchange market.
Jamaica’s inflation rate of 6.6% in July 2023, while slightly above the 6.3% recorded in June 2023, is significantly below the 11.8% recorded in April 2022. Core inflation (which excludes food and fuel prices from the Consumer Price Index (CPI)) in July 2023 of 5.2% was also considerably lower than the 8.4% recorded in April 2022.
While the key drivers of headline inflation, such as grain prices, shipping costs and inflation expectations, continued to decline, there was exceptionally high agricultural price inflation in June and July 2023, which reflected the impact of prevailing drought conditions. Additionally, there have been ongoing upward adjustments in the price of meals consumed away from home, and the first-round effect of the adjustment in the national minimum wage was recorded in the June 2023 CPI.
The uptick in inflation over the past three months is projected to continue for the remainder of the September 2023 quarter, driven by higher agricultural prices, higher education costs and wage pressures. Inflation is, however, expected to generally decelerate to the Bank’s target range of 4.0 to 6.0% by the December 2023 quarter and except for a few months in 2024, should remain there. The forecast assumes that international grain prices will increase in the September 2023 quarter, consequent on a rise in geopolitical tensions between Russia and Ukraine.
Inflation could, however, rise above this forecasted path. Higher-than-projected future wage adjustments in the context of the tight domestic labour market, second-round effects from the agricultural price inflation, a worsening in supply chain conditions and an elevation of world oil prices could put further upward pressure on inflation.
However, inflation expectations for the 12 months ahead declined to 8.3% in June 2023 from 9.6% in the previous survey and its peak of 12.8% in April 2022. This was due mainly to businesses’ perception of the authorities’ control of inflation which improved in the June 2023 survey relative to the previous survey.
Downside risks to this outlook include weaker-than-expected global growth, which could reduce domestic demand, and the non-materialisation of some projected increases to regulated prices.
The MPC noted that future monetary policy decisions will depend on the incoming data related to the indicators of the above-noted potential headwinds to inflation. The Bank will continue to closely monitor the global and domestic economic environments for potential risks to Jamaica’s inflation rate and act accordingly.
The Planning Institute of Jamaica (PIOJ) is projecting a fall in the poverty rate from 16.7 per cent to which it rose in 2021, representing a 5.7 percentage point increase relative to 2019.
Director General, Dr. Wayne Henry, notes that the out-turn reflected the adverse impact of the COVID-19 pandemic on household incomes and consumption, which “is in keeping with global and regional expectations and experiences”.
Henry indicated, however, that the impact was tempered by positive movements in the macro economy and social interventions by the Government and the private sector.
Henry said the overall rise in poverty in 2021 was driven by increases in two regions, noting that the rate in the third was statistically the same. He informed that the rate increased in the Greater Kingston Metropolitan Area by 5.7 percentage points and rural areas by 7.9 percentage points but remained relatively unchanged in other urban centres.
He stated that while the Jamaican economy recorded growth of 4.6 per cent in 2021, and employment increased by 8.3 per cent in July 2021 relative to July 2020, real GDP (gross domestic product) was still 5.8 per cent below its 2019 level and employment was 3.3 per cent below what it was in July 2019. These factors explain the higher poverty rate in 2021 relative to 2019. The World Bank estimated that in 2021 about 97 million more people were living on less than US$1.90 per day because of the pandemic, increasing the global poverty rate from 7.8 per cent to 9.1 per cent.
Additionally, 163 million more were living on less than US$5.50 per day. Globally, three to four years of progress towards ending extreme poverty are estimated to have been lost. In Jamaica, consumption expenditure data rather than income are used to measure poverty, due to the availability and relative accuracy of the statistics.
The rates are first calculated from household data at the regional level and then aggregated nationally.
He further highlighted that similar to most economies, Jamaica was still recovering from the COVID-19 pandemic in 2021. Going forward, the poverty rate is expected to fall, given the continued improvement in the economy, as reflected in the improvement in real GDP and employment.
More than 200 ships are stuck on both sides of the Panama Canal after authorities capped the number of crossings because of a severe drought. The large vessels, thought to be carrying millions of dollars worth of goods, are locked in a traffic jam with some waiting for weeks to cross.
Vessel-tracking data highlights the extent of the issue with hundreds of ships, mainly bulk cargo or gas carriers, seen waiting near entrances to the canal on the Pacific and Atlantic oceans.
The number of daily transits through the canal has been capped at 32 by water authorities in a bid to conserve water. Panama is set to lose $ 200 million in revenue from the delays and it could cause a spike in US grocery and parcel prices as extra fees are hiked onto shipping costs.
The entrances on both sides of the Panama Canal are jammed with some ships backed up for more than 20 days. Some shipowners have resorted to rerouting their journeys to avoid the backlog. The canal uses three times as much water as New York City daily and needs rainfall to replace it.
However, the rainy season is yet to arrive in Panama and the canal is going through its driest spell in more than a century. Restrictions for the number of vessels passing through have been extended until September 2. Without enough rain, the ship transits are cut and the lucky ones that cross pay hefty premiums. This increases transport costs for cargo owners like American oil as well as Asian importers and gas exporters.
Ricaurte Vásquez Morales, the administrator of the Panama Canal, warned the restrictions could remain in place for the rest of the year.
