• The economic landscape in Canada has taken some thrilling turns recently. After a steady average inflation rate of 1.9% over the two decades leading up to the COVID-19 pandemic, perfectly aligned with the Bank of Canada’s (BoC) goal of 2.0%, inflation data dramatically intensified in 2022.
• Prices soared in 2022, peaking at 8.1% in June, driven by post-COVID price shocks, with the deceleration in subsequent quarters further supported by easing supply chain issues and a pullback in commodity prices. Fast forward to October 2024, Canada’s annual inflation rate has landed at a smooth 2.0%, though marking a notable 0.4% increase after two months of declines.
• Looking ahead, Canada's below-trend growth is set to keep inflation within the target, paving the way for the BoC to continue its bold rate-cutting journey that began in June 2024. So far, the BoC has made waves by slashing its policy rate by 175 basis points down to 3.75%.
• What’s more, the BoC’s commitment to maintaining a "low, stable, and predictable" environment for inflation is crucial in boosting investment confidence and improving living standards. While this suggests a dual mandate of inflation-control targeting and a focus on job creation and productivity, the BoC is widely perceived as independent and credible.
• That said, Canada's significant household debt issues are likely to encourage the BoC to act aggressively, increasing expectations for the BoC's policy rate to decline to 3.50% by end-2024 and to 2.50% by end-2025.
• Yet, getting cuts below these levels might prove to be a challenge in a still-complex inflationary environment, as the consumer price index (CPI) headline inflation is projected to average around 2.5% in the upcoming decade.

(Sources: Fitch Solutions & NCBCM Research)

• According to PIOJ data released on November 20, 2024, the Jamaican economy is estimated to have contracted by 2.8% for the quarter ended September 2024 (Q3 2024), reflecting declines in both the Services and the Goods-Producing industries.
• During the quarter, the contraction in the economy was broad-based. All the Goods Producing industries declined, while among Services industries only Finance and Insurance services grew marginally. Agriculture, Forestry & Fishing went down 13.5%, leading to the decline in the Good Producing Industry, reflecting the adverse impact of Hurricane Beryl and other hydrological events on agricultural infrastructure, crops and livestock.
• Similarly, the Mining & Quarrying industry contracted by 15.2%, reflecting declines in the Bauxite & Alumina and Quarrying Sub-industries. Total bauxite production is down 17.1% with lower alumina and crude bauxite production being notable culprits. The Quarrying sub-industry also fell, particularly in sandstone and Limestone production.
• However, the remaining goods-producing sectors also declined. Manufacturing declined by 2.0% due to declines in Food, Beverages & Tobacco, while Construction was also estimated to have contracted by 2.8%.
• Declines in the Services Industry were led by the Electricity & Water Supply and Transport, Storage & Communication sectors, which saw the most significant contractions.
• The Electricity & Water industry declined by 5.8%, reflecting decreases in electricity and water consumption. Notably, there was a 10.6% decrease in usage for the largest power users amid significant damage and losses from Beryl and delays in electricity restoration in sections of the island. Additionally, there was a 1.0% reduction in water usage, primarily in the western division. Meanwhile, the Transport, Storage & Communication sector contracted by 2.8%, owing to a 7.8% decline in passenger movement and a 9.7% decrease in cargo handling, with significant drops at the Port of Kingston (down 10.8%) and Outports (down 22.6%).
• Amid the Q3 contraction, Jamaica’s economic outlook for Q4 2024 is negative due to the lingering effects of Hurricane Beryl, Tropical Storm Rafael, heavy rainfall and the U.S. State Department’s Level 3 Travel Advisory. Considering these after-effects, the PIOJ expects economic growth measured by Real GDP to fall within the range of -1.5% to 0.0%. If Jamaica’s economy contracted for a second consecutive time in Q4 2024, it would meet the technical definition of a recession.

  (Source: PIOJ & NCBCM Research)

• According to PIOJ data released on November 20, 2024, the Jamaican economy is estimated to have contracted by 2.8% for the quarter ended September 2024 (Q3 2024), reflecting declines in both the Services and the Goods-Producing industries.
• During the quarter, the contraction in the economy was broad-based. All the Goods Producing industries declined, while among Services industries only Finance and Insurance services grew marginally. Agriculture, Forestry & Fishing went down 13.5%, leading to the decline in the Good Producing Industry, reflecting the adverse impact of Hurricane Beryl and other hydrological events on agricultural infrastructure, crops and livestock.
• Similarly, the Mining & Quarrying industry contracted by 15.2%, reflecting declines in the Bauxite & Alumina and Quarrying Sub-industries. Total bauxite production is down 17.1% with lower alumina and crude bauxite production being notable culprits. The Quarrying sub-industry also fell, particularly in sandstone and Limestone production.
• However, the remaining goods-producing sectors also declined. Manufacturing declined by 2.0% due to declines in Food, Beverages & Tobacco, while Construction was also estimated to have contracted by 2.8%.
• Declines in the Services Industry were led by the Electricity & Water Supply and Transport, Storage & Communication sectors, which saw the most significant contractions.
• The Electricity & Water industry declined by 5.8%, reflecting decreases in electricity and water consumption. Notably, there was a 10.6% decrease in usage for the largest power users amid significant damage and losses from Beryl and delays in electricity restoration in sections of the island. Additionally, there was a 1.0% reduction in water usage, primarily in the western division. Meanwhile, the Transport, Storage & Communication sector contracted by 2.8%, owing to a 7.8% decline in passenger movement and a 9.7% decrease in cargo handling, with significant drops at the Port of Kingston (down 10.8%) and Outports (down 22.6%).
• Amid the Q3 contraction, Jamaica’s economic outlook for Q4 2024 is negative due to the lingering effects of Hurricane Beryl, Tropical Storm Rafael, heavy rainfall and the U.S. State Department’s Level 3 Travel Advisory. Considering these after-effects, the PIOJ expects economic growth measured by Real GDP to fall within the range of -1.5% to 0.0%. If Jamaica’s economy contracted for a second consecutive time in Q4 2024, it would meet the technical definition of a recession.

  (Source: PIOJ & NCBCM Research)

• The Bank of Jamaica's Monetary Policy Committee (MPC) reduced the policy rate by a further 25 basis points (bps) to 6.25% per annum, effective 22 November 2024. In the meeting, the MPC also agreed to preserve relative stability in the foreign exchange market.
• This latest rate reduction brings the cumulative cuts to 75bps since the BOJ pivoted its monetary policy stance earlier this year on an improved inflation outlook. The continued easing of monetary policy is also a much-needed stimulus for the economy amid the slowdown in activity in Q2 and the subsequent 2.8% contraction in the third quarter.
• Inflation for October 2024 was 4.9%, down from 5.7% in September, and within the Bank’s target range of 4.0–6.0%. Core inflation, which excludes the most volatile inflation components, has remained below 6.0% for 16 consecutive months, indicating stable price pressures.
• Inflation is expected to remain within the target range over the next two years due to declining international grain prices and moderating inflation in trading partner economies. Private sector inflation expectations are also improving, supported by stable foreign exchange market conditions.
• Notwithstanding the encouraging inflation outlook, notable risks include economic policy changes among trading partners, geopolitical tensions, adverse weather and labour market pressures. The MPC emphasised that future interest rate adjustments will be based on incoming data and reaffirmed its commitment to foreign exchange stability.
• Given the sharp contraction in economic activity and inflation pressures subsiding, a more aggressive pace of rate reduction would be welcomed by local interests. However, the BOJ appears to be balancing the risks to inflation from a weaker exchange rate if the interest rate differential between the JMD-USD widened.

(Source: BOJ)

• Mexico has a plan to receive deported Mexicans from the U.S. if President-elect Donald Trump launches mass deportations of immigrants living in the U.S. illegally, Mexican President Claudia Sheinbaum said on Thursday, November 21, 2024.
• Sheinbaum added Mexico would put together a plan to show that deportations were not necessary, but she did not give details on how that would be done.
• "We will receive Mexicans, and we have a plan for it, but before that, we will work to demonstrate that they do not have to deport our compatriots who are on the other side of the border," Sheinbaum said. "On the contrary, they even benefit the economy of the United States."
• Trump has vowed mass deportations and a vast immigration crackdown as soon as he takes office on Jan. 20. He could call on everyone from the U.S. military to diplomats overseas to turn the pledge into a reality. However, Sheinbaum, who took office in October, has stressed the importance of humanitarian rights when dealing with migration, outlining a delicate balancing act with her future U.S. counterpart.
• Sheinbaum said this week she will eventually present Trump with a "humanistic approach" to controlling migration that addresses the root causes. Her cabinet is also set to meet to discuss issues facing Mexico under the incoming Trump administration including migration, trade and security.

(Source: Reuters)

• Global economic output would suffer a "sizeable" loss if trade became more fragmented and an immediate boost to inflation would only fade over a few years, the European Central Bank's chief economist Philip Lane said on Thursday.
• His comments marked the ECB's starkest warning yet about the potential consequences of a global trade war, a concern that has loomed large for investors since Donald Trump’s victory in the U.S. presidential election earlier this month, driven by his protectionist stance.
• "Trade fragmentation entails sizeable output losses," Lane said in slides prepared for a speech in Amsterdam. Lane envisaged a scenario in which global trade is increasingly divided between Western countries and a China-led East.
• His comments marked the ECB's starkest warning yet about the potential consequences of a global trade war, a concern that has loomed large for investors since Donald Trump’s victory in the U.S. presidential election earlier this month, driven by his protectionist stance.

Source: (Reuters)

• The number of Americans filing new applications for unemployment benefits fell to a seven-month low last week, suggesting that job growth likely rebounded in November after abruptly slowing last month amid hurricanes and strikes.
• It is, however, taking longer for laid-off workers to find new jobs, posing an upside risk to the unemployment rate. The report from the Labor Department on Thursday also showed unemployment rolls¹ swelling to levels last seen in late 2021.
• Labour market slack keeps the door open to a third interest rate cut from the Federal Reserve next month, despite a recent lack of progress in lowering inflation to its 2% target.
• "There is little evidence of large layoffs taking place," said Gisela Hoxha, an economist at Citigroup. "However, in a low hiring environment, those individuals that are laid off are finding it harder to get a new job and are remaining on unemployment benefits for longer, which implies an upside risk to the unemployment rate.

_________________________________

¹Unemployment rolls refer to the number of people who are receiving unemployment benefits:

(Source: Reuters)

• For Q3 2024¹, Kingston Wharves Ltd. (KW) saw its earnings slashed by 21.7% year-over-year to close at J$760.9Mn as revenue growth (+4.2%) was outpaced by the increase in its cost of sales (+23.9%). This weaker Q3 performance weighed on the company’s earnings for the nine months ending September 30, 2024 (9M 2024) which dipped 4.3% to J$2.18Bn (EPS: $1.46).
• Due to slower growth in Q3, revenues for the 9M 2024 period totalled J$7.84Bn, reflecting an 11.3% year-over-year increase. Amid the slow revenue growth, the Logistics Services Division was the standout revenue performer. Booming demand for specialised logistics and warehousing drove logistics revenues up by 20.0% to J$2.90Bn and operating profits by 30.0% to J$1.10Bn during the 9M period.
• Conversely, operating profits from Terminal Operations slipped 14.0% to J$1.40Bn, despite a 7.0% revenue growth². The profit slip reflected higher depreciation and major infrastructure spending on upgrades to boost throughput capacity.
• Owing to slowed operating profit from Terminal Operations, KW’s 9M 2024 consolidated operating profit, was 2.35% lower than for 9M 2023, closing at J$954.50Mn. Higher finance costs for the quarter also dented 9M profits, doubling to $153.61Mn.
• Notwithstanding the profit dip, KW continues to invest in infrastructure, including a recent J$30.0Mn renovation of Berth 7, enhancing its capacity to handle larger vessels and boosting transhipment capabilities. Moreover, future upgrades are planned to improve terminal efficiency and customer experience.  
• Ultimately, KW’s infrastructure spending aims to maintain its market leadership in cargo receival, handling, warehousing, and delivery for domestic and regional markets.
• KW’s stock price has appreciated by 12.6% year-to-date. As of the end of Wednesday’s trading session, the company’s stock price closed at J$30.40, with a corresponding P/E ratio of 14.40x which is lower than the 23.07x average for the Main Market EIM³ Sector.

____________________________________

¹July 1 - September 30, 2024

²Terminal operations represent over 60.0% of KW’s revenues.

³Energy, Industrials, and Materials.

(Source: NCBCM Research & KW Financial Statements)

• Prime Minister, Dr. the Most Hon. Andrew Holness, has outlined a comprehensive strategy to transition Jamaica towards robust and inclusive economic growth. The new policy statement comes after a decade of economic stabilisation and represents the Government’s focus on pursuing growth that creates tangible benefits for all Jamaicans.
• Reflecting on Jamaica’s economic journey, Prime Minister Holness highlighted the achievements recorded over the past decade, including a reduction in the debt-to-gross domestic product (GDP) ratio from 146.0% to under 70.0%, and a fall in the unemployment rate from 15.0% to a record low 4.2%.
• Dr. Holness declared “mission accomplished” on economic stability and said the Government is now pivoting towards transformative and inclusive growth. Key imperatives under the policy are Urban Renewal Tax Credit – revamping tax credits to attract private investments in underserved areas; National Infrastructure Fund – establishing a fund for public-private partnership projects; and Accelerated Tax Write-offs – incentivising businesses to modernise facilities and adopt advanced technologies¹.
• The Prime Minister also outlined the six pillars of the new growth agenda: Human Capital Development, Economic Diversification, Infrastructure Development, Reducing Red Tape, Safety and Security, and Inclusive Growth. He stated that ensuring no one is left behind is critical to this strategy, aligning with the Jamaica Social Protection Strategy.
• This new policy initiative aims to foster a more equitable economy that benefits all Jamaicans while ensuring sustainable growth for future generations.

________________________________

¹Other initiatives include the Removal of Taxes on Tips – aiming to reward service excellence in hospitality and service sectors; and the Consolidation of Payroll Taxes – moving forward with long-awaited tax reform.

(Source: JIS)

• Costa Rica's GDP is expected to grow 4.1% in 2024 and 3.6% in 2025, according to Fitch Solutions, up from earlier projections of 4.0% and 3.4% respectively. The upward revision in the forecast for GDP is in line with a slightly improved outlook for US economic growth by the agency.
• The improved outlook is also informed by recent data indicating that economic activity continued to hold up well during Q3 2024, with growth estimated at around 4.0% compared to an average of 4.3% over the first half of the year
• Private consumption will be the main contributor to growth, amid low inflation and a tighter labour market, while easing monetary conditions will sustain robust investment growth.
• Additionally, export growth will remain positive, but slow due to softer demand in the US and less favourable base effects for the tourism sector.
• Risks to the forecasts are mostly connected to dynamics in the US economy, with the potential for more protectionist and anti-immigration policies under Trump a key headwind for Costa Rica and the wider Central American region.

 (Source: Fitch Solutions)