• The annual Consumer Price Index (CPI) rose to 4.9% for the year to April (March 2023: 5%), slightly less than the 5% estimate and the lowest annual pace since April 2021.
• Excluding volatile food and energy categories, core CPI rose 0.4% monthly and 5.5% from a year ago, both in line with expectations. Markets reacted positively to the news, with futures turning positive as Treasury yields were lower.
• The CPI reading has cooled considerably since peaking out at around 9% in June 2022. However, inflation still has held well above the Fed’s 2% annual target.
• The CPI reading comes just days after the Bureau of Labour Statistics (BLS) reported that nonfarm payrolls increased by 253,000 in April, above expectations and indicative that the labour market is still hot despite Fed efforts to cool demand.

(Source: Reuters)

• The Bank of England on Thursday hiked interest rates by 25 basis points and revised its economic projections to now exclude the possibility of a U.K. recession this year.
• The Monetary Policy Committee voted 7-2 in favour of the quarter-point increase to take the main bank rate from 4.25% to 4.5%, as the bank reiterated its commitment to taming stubbornly high inflation.
• The headline consumer price index rose by an annual 10.1% in March, driven by persistently high food and energy bills. Core inflation, which excludes volatile food, energy, alcohol and tobacco prices, increased by 5.7% over the 12 months to March, unchanged from February’s annual climb and reiterating the risk of entrenchment that the bank is concerned about.
• The MPC no longer expects the U.K. economy to enter recession this year, according to the updated growth forecasts in its accompanying Monetary Policy Report. U.K. GDP is now expected to be flat over the first half of this year, growing 0.9% by the middle of 2024 and 0.7% by mid-2025. The country’s newest GDP print will be published Friday.
• The economy has thus far shown surprising resilience in fending off a widely anticipated recession, with falling energy costs and a fiscal boost announced in the government’s Spring Budget improving the outlook.

(Source: CNBC)

• The announcement that a low-cost European airline will be expanding its services to the Caribbean, including Jamaica this winter season has been well received by the Ministry of Tourism. Norse Atlantic Airways will begin flying between London Gatwick to Kingston and Montego Bay in October this year. 
• Flights to Montego Bay will operate four times a week starting October 29, 2023, while Norse Atlantic Airways will fly to Kingston three times a week starting October 31. The fares for the new flights will start at £559 for a return trip.
• Delano Seiveright, Senior Advisor and Strategist in the Ministry of Tourism said the introduction of the new flights is not only significant for Jamaica but also for the development of Kingston, where the only other carrier with nonstop flights to London Gatwick is British Airways.  
• The tourism strategist predicts that there will be an increase in bookings due to the new flights, pointing out that visitor arrivals from the UK have already exceeded pre-COVID-19 levels. 
• The buoyancy in the tourism sector has been the main driver for economic growth since the reopening of the economy. This announcement will further put Jamaica in a position to benefit tremendously from increased arrivals, as the UK is one of the country’s main markets. Additionally, increased earnings from tourism will continue to drive economic growth.

(Source: RJR News)

• Minister of Tourism, Hon. Edmund Bartlett, says the Government is focused on ensuring that small and medium-sized tourism enterprises (SMTEs) can command a larger share of the tourism dollar. He highlighted that the government is prioritising this by creating strategic policies, programmes and initiatives that can aid in building resilience and increasing the capacity of local SMTEs to earn more.
• Minister Bartlett was speaking to JIS News following a panel discussion at the Arabian Travel Market tradeshow in Dubai, United Arab Emirates, on May 3. He noted that the panel discussion, under the theme ‘Strategic Sustainability Planning – Where Does the Supply Chain Start?’ involved some major tourism players from markets that Jamaica is trying to penetrate in the Middle East and Asia.
• Bartlett said that coming out of the pandemic the sector is being reimagined, recognising that the post-COVID-19 traveller is not the same as visitors past and that the SMTEs will have a huge role to play in that regard.
• He noted that sustainability and resilience in the global tourism industry can only be achieved by inclusivity and full cooperation from all sector players – big and small, noting that the post-COVID-19 era must be one where players of all sizes in the tourism value chain are engaged and respected. He highlighted that the essence of tourism as we know is the small and medium enterprises as they are 80 per cent of the services and the experiences that visitors have when they come to the destination.
• Medium, small and micro enterprises (MSMEs) are essential to the Jamaican economy, making up over 97% of the island’s taxpaying businesses. The sector is responsible for the majority of employment in Jamaica and drives economic growth and development. As such, the Government of Jamaica (GOJ) continuously seeks to strengthen the sector through programmes that support these businesses. Moreover, the resurgence of the tourism industry has been the main driver of economic growth.

(Source: JIS)

• In the coming week, Fitch Solutions will be watching inflation prints from several key markets, namely Mexico, Chile, Brazil, and Argentina. In Mexico, it is expected that headline CPI growth will continue cooling from 6.9% y-o-y (0.3% m-o-m) in March, on the back of favourable base effects.
• Fitch still expects Banco de México to hike again by 25bps to a terminal rate of 11.50% in May, but risks to this forecast are skewed to the downside. In terms of the longer-term trajectory for inflation, Fitch anticipates that it will land at 5.1% by the end of 2023, paving the way for 50bps of easing by December.
• In Brazil, inflation came in at 4.7% y-o-y (0.7% m-o-m) in March, a notable slowdown that was mostly due to base effects. However, an acceleration in prices in the second half of 2023 is expected as base effects turn. Headline CPI in Brazil is expected to end the year at 5.8%, though Fitch still expects the Banco Central do Brasil will lower the Selic rate from 13.75% currently to 12.75% by the end of 2023. 
• The outlook for Argentina is much gloomier. Fitch anticipates that in Argentina, prices will continue climbing from 104.3% y-o-y (7.7% m-o-m) in March, as the inflation spiral continues. Argentina nosedived into an economic crisis in 2018 after the peso lost half its value and it has never fully recovered. Annual inflation has remained above 50% for majority of the time since then and reached 103% in February. Additionally, the country, which is a major global grains exporter, is grappling with one of its worst droughts in history knocking billions off the economy from lost exports, thereby fueling domestic prices.
• Given these factors, there is no expectation that Argentine CPI growth will see significant easing this year. Given this, Fitch plans to make an upward revision to its current inflation average forecast of 102.8% in the coming days.

(Source: Fitch Solutions)

• Bank of Japan (BOJ) Governor Kazuo Ueda said on Tuesday that the central bank will end its yield curve control (YCC) policy and then start shrinking its balance sheet, once prospects heighten for inflation to sustainably hit its 2% target. Speaking in parliament, Ueda said Japan's economy was picking up, and inflation expectations remain at high levels. "We're seeing some positive signs in trend inflation, including inflation expectations," the BOJ chief said.
• "When we can foresee inflation sustainably and stably meeting our 2% target, we will abandon yield curve control and then move towards shrinking the bank's balance sheet." Ueda, however, warned of various uncertainties on the outlook such as whether recent strong wage growth will be sustained, and spread to smaller firms.
• With inflation exceeding the BOJ's target, markets are rife with speculation that Ueda will soon phase out YCC, which has drawn public criticism for distorting market pricing and crushing bank profits. Ueda has repeatedly ruled out an immediate interest rate hike on the view the recent rise in inflation was driven mostly by rising import costs, rather than strong domestic demand.
• However, at the first meeting, since Ueda became governor last month, the BOJ removed policy guidance pledging to keep interest rates at "current or lower levels." He also announced a plan to review its past monetary policy moves, laying the groundwork to gradually phase out his predecessor's massive stimulus programme.
• Japan's core consumer inflation hit 3.1% in March, above the central bank's 2% target, and an index excluding fuel costs rose at the fastest annual pace in four decades in a sign of broadening price pressure.

(Source: Reuters)

• Shares of PacWest Bancorp led the declines in U.S. regional lenders at market open on Tuesday as investors feared the ongoing banking crisis could deepen. PacWest dropped 5% in early trading, a day after the Los Angeles-based lender's decision to cut its quarterly dividend failed to stem worries about its financial stability.
• PacWest and Western Alliance, which have been at the heart of the sell-off in regional banks, saw the steepest decline in deposits in the first quarter after First Republic, according to S&P Global Market Intelligence data.
• "The ones that have been hit the hardest are the ones that continue to see the most amount of stress," said Randy Frederick, managing director of trading and derivatives at the Schwab Center for Financial Research. "If banks want to get their stock prices back up, if they want to remain solvent, they have to make sure that any new loans they make are of high credit quality so that they don't worsen their position."
• Adding to the banking woes, U.S. firms of all sizes were showing less demand for credit relative to three months ago, according to a Federal Reserve survey. This survey is among the first measures of sentiment across the sector since the recent bank failures. The tightening credit conditions for U.S. businesses and households in the first quarter, however, was likely due to the impact of higher interest rates rather than the cliff-like decline in credit demand, after the March collapse of Silicon Valley Bank, the Fed's quarterly survey showed.
• Wall Street executives and bank analysts last week called on regulators to quickly provide more protection for bank deposits and consider other backstops, arguing only an intervention could stop the crisis. 

(Source: Reuters)

• Seprod has recorded a net profit attributable to shareholders of $981.32Mn for the first quarter of the financial year, signifying a 64.9% yoy increase.
• Quarterly revenue rose by 129.2% yoy to $27.06Bn, primarily driven by continued expansion in Trinidad and Guyana markets. Trinidad has had strong consumer demand after lifting COVID-19 restrictions on public events. Strong consumer demand in Trinidad following the lifting of COVID-19 restrictions on public events, and Guyana's rapidly growing economy contributed to this growth. Additionally, a 25% increase in export sales and organic growth in the domestic market spurred by the post-COVID-19 economic recovery supported revenue growth.
• The cost of sales for the quarter was up 127.1% to $20.15Bn, mainly due to costs directly associated with revenue generation. This contributed to a modest improvement in gross margin to 25.5% (Q1 2022: 24.9%).
• Operating expenses rose by 137.8% to $4.46Bn during the quarter, reflecting increased demand and Seprod's amalgamation with AS Bryden. However, going forward, the company’s profit line will be positively impacted as the Group transitions to its new distribution campus, therefore eliminating over $300Mn of warehousing and logistics costs incurred due to the destruction of the main logistics centre in 2021.
• Seprod’s stock price has increased by 0.93% since the start of the calendar year. The stock closed Monday’s trading session at $71.66 and currently trades at a P/E of 15.9x, which is above the Main Market Distribution & Manufacturing Sector Average of 14.5x. This could be due to the fact that the market may have already priced in the anticipated improvements in profitability, revenue growth, and operational efficiency resulting from the expansion and modernization efforts.
• In the near term, Seprod aims to increase the region’s supply of margarine and is in the process of expanding its subsidiary Caribbean Products Limited to handle the increased production load. Over the past ten months, the company has been renovating and upgrading the equipment and is expected to ramp up the new capacity within another few months. At that time, Seprod plans to start producing more margarine for sale to the Caribbean region, but it will also be producing the items on behalf of a third party under contract. The modernization is expected to benefit Seprod’s bottom line as the company prepares for more export of the different types of margarine, inclusive of bulk for the baking and food industry; and hard stick and soft table margarine for home use.

(Source: JSE)

• Jamaica generated export earnings of just over US$1.9Bn, between January and December 2022. This marks a 28.4% increase compared to the US$1.48Bn recorded for the corresponding period in 2021, according to the Statistical Institute of Jamaica (STATIN).
• The value of last year’s exports surpassed the US$1.65Bn earned in 2019, prior to the COVID-19 pandemic’s onset, by 15%. STATIN attributed the 2022 performance primarily to a 102.6% rise in the export of ‘Mineral Fuels’. Domestic exports amounted to US$1.36Bn, which was 6.7% above the US$1.28Bn recorded in 2021. However, this figure was 9.8% lower than the US$1.5Bn earned in 2019, mainly due to reduced alumina exports.
• The top five destinations for Jamaica’s exports were the United States of America (USA), Puerto Rico, the Russian Federation, the United Kingdom, and Canada. Exports to these countries increased by 46.3% to just over US$1.4Bn, largely driven by higher fuel exports to the USA. Meanwhile, Jamaica’s expenditure on imports in 2022 rose by 29.5% to US$7.73Bn, compared to 2021. The increased spending was mainly due to higher imports of ‘Raw Materials/Intermediate Goods’, ‘Fuels and Lubricants’, and ‘Consumer Goods’. These rose by 24.4%, 53.7% and 21.8%, respectively, and contributed to the overall expenditure figure surpassing the 2019 pre-pandemic level total of US$6.4Bn.
• The increased spending on ‘Raw Materials/Intermediate Goods’, ‘Fuels and Lubricants’, and ‘Consumer Goods’ can be partly attributed to elevated oil and gas prices in 2022 as Russia’s invasion of Ukraine put upward pressure on energy prices. Additionally, increased shipping costs in 2022 contributed to higher prices for other goods throughout the year.
• Jamaica's primary trading partners in 2022 were the United States, China, Brazil, Trinidad and Tobago, and Japan. Import expenditure from these countries rose by 33.7% to US$4.97Bn, primarily due to increased fuel inflows from the United States and Trinidad and Tobago.
• Export plays a critical role in supporting economic growth. Revenue from exports generates foreign exchange, that is used to build foreign reserves.  A healthy foreign reserve stock is crucial to Jamaica as it allows the country to assure international investors of the nation's ability to fend off external shocks to the system.

(Sources: STATIN and JIS News)

• Fitch maintains its core view that rapid GDP growth and increased government spending will help promote greater social stability in Guyana, despite elevated inflation in the near term.
• The agency forecasts real GDP growth of 29.0% in 2023, following an estimated 62.3% in 2022, primarily driven by the expanding oil sector.. The government plans to use surging oil revenues to significantly increase spending on capital investments and social initiatives, which Fitch believes will mitigate the threat of large-scale protests in the near term.
• In 2022, Guyana withdrew US$607.6Mn from the National Resource Fund (NRF) with a planned budget to increase withdrawals to US$1.0Bn in 2023 to support the development of the non-oil economy, including structural increases in spending on health, education and housing.
• In light of these factors, Fitch holds Guyana's Short-Term Political Risk Index (STPRI) score at 57.4 out of 100. However, the 'social stability' component remains the lowest-scoring element in the STPRI, at 46.3, indicating ongoing risks stemming from a relatively weak labor market and ethnic tensions between the Indo- and Afro-Guyanese population.

(Source: Fitch Solutions)