• The U.S. trade deficit narrowed by the most in nearly 9-1/2 years in April as exports jumped to a record high, putting trade on course to contribute to economic growth this quarter. The sharp decline reported by the Commerce Department on Tuesday reversed March's surge and suggested that trade could be shifting back to a more normal pattern. The deficit widened, hitting successive all-time highs, as the United States' economy led the recovery from the COVID-19 pandemic global downturn. 
• "The deficit has widened on trend over the past two years because the U.S. economy has generally grown faster than most of its major trading partners over that period," said Jay Bryson, chief economist at Wells Fargo in Charlotte, North Carolina. "We look for trade to make a modest positive contribution to overall GDP growth in the second quarter.” 
• The trade deficit dropped 19.1%, the largest decline since December 2012, to $87.1 billion. This is below the expectations of economists polled by Reuters, which had forecast the trade gap shrinking to $89.5 billion. 
• In April, exports of goods and services increased 3.5% to an all-time high of $252.6 billion. The broad increase was led by shipments of industrial supplies and materials, which hit a record high amid rises in exports of natural gas, precious metals, and petroleum products. Exports of services also increased from $2.4Bn to $76.5Bn, lifted by gains in both travel and transport. 
• Imports of goods and services fell 3.4% to $339.7 billion. Imports had been rising rapidly as businesses replenished inventories to meet strong domestic demand. However, with the Federal Reserve raising interest rates to combat inflation, demand is slowing. Inventories of some goods are also close to normal levels, reducing the need for imports. The drop in imports could also be the result of shutdowns in China as it battled new COVID-19 infections. Imports from China fell by $10.1 billion, helping to narrow the goods trade gap with Beijing to $34.9 billion from $43.4 billion in March.

(Source: Reuters)

• Jamaica’s tourism sector is on track for record arrivals this summer, surpassing 2019 levels, when the country had the highest number of visitors ever seen for the summer months. Jamaica welcomed approximately 250,584 visitors in July 2019. 
• “Summer 2022 will be the strongest summer that Jamaica’s tourism has ever seen”, said Minister of Tourism, Hon. Edmund Bartlett.” All the bookings and the indications are that we are going to exceed 2019 levels this summer. 
• These expectations for strong summer arrivals bode well for other sectors as well, such as manufacturing, distribution, agriculture and transportation, which are directly and indirectly linked to tourism. This will ultimately continue to bolster the growth and recovery in financial performance already being experienced by some companies in these sectors. 
• Additionally, from a macro-economic perspective increased tourist arrivals will support the direct and indirect demand for workers and hence support the employment rate and disposable income. Further, the associated increased inflow of foreign currency will also aid in stabilizing the foreign exchange market. 

(Sources: JIS News and NCBCM Research)

• The Bank of Jamaica (BOJ) has been given the authority to issue Central Bank Digital Currency (CBDC) as legal tender locally, with the Senate’s passage of the Bank of Jamaica (Amendment) Act, 2022 at Gordon House on Friday (June 3). 
• Consequent to the legislation’s passage, the way has been paved for the BOJ to proceed with the national rollout of the CBDC – JAM-DEX. The pilot was undertaken between August and December 2021. 
• Full CBDC implementation is expected to significantly reduce traditional challenges associated with many Jamaicans not having a bank account. Ultimately the implementation of the CBDC will improve the level of financial inclusion domestically, and help to improve payment systems. 
• Currently, the National Commercial Bank (NCB) offers JAM-DEX through Lynk, its digital wallet. In this regard, anyone with Lynk will be able to complete transactions with another Lynk wallet holder using JAM-DEX at a date to be advised by NCB.

(Sources: JIS News and NCBCM Research)

• Fitch will be closely monitoring the upcoming May inflation prints from Brazil, Chile, Colombia and Mexico. Notably, commodity prices are expected to remain elevated throughout 2022, as the Russia-Ukraine conflict and the subsequent economic sanctions on Russia continue to disrupt the global supply of fuel and food in particular—the two countries provided 27% of global wheat exports and 14% of global corn exports in 2019. 
• In addition, persistent supply chain issues, exacerbated by COVID-19 lockdowns in China that shutdown ports and stranded freight ships will also contribute to price pressures. That said, the Agency’s global team forecasts that headline inflation growth will peak by end-Q2 2022. 
• Of note Peru’s May inflation print last week showed inflation reached 8.1% YoY, up only modestly from 8.0% YoY in April, possibly signaling that the peak of price growth is approaching. 
• Higher government spending on gasoline subsidies across several markets (including Chile, Colombia and Mexico) will reduce fuel costs for households.

(Source: Fitch Solutions)

• Barbados will be one of the first two Caribbean countries in which a common Central Bank Digital Currency (CBDC) is to be rolled out. The CaribCoin project, as it is being referred to, is a joint venture between Schröder, the Chief System Architect, and the Caribbean-based technology accelerator Abed Ventures. 
• Caribcoin would first be rolled out in Barbados and Jamaica and then other Caribbean countries. However, renowned regional financial and economic expert Marla Dukharan suggested that each country in the region could do well with their own digital currency while adding that there was especially a need for a cross-border settlement system. 
• Pointing to some of the benefits of a digital currency, Schöder said it allowed for faster transactions and was more accessible, safe, sustainable and stable. It also presents an opportunity to create a pan-Caribbean digital money, that can be used across the region. 
• A common CBDC would also deliver seamless, faster and cheap payments, provide liquidity and enable a fast-track towards a CARICOM Single Market & Economy (CSME) without a need to replace national currencies but simultaneously enhance financial inclusion in the region.

(Source: Barbados Today)

• Cleveland Federal Reserve President Loretta Mester said on Friday (June 3rd, 2022) that there is not ample evidence that inflation has peaked and thus is on board with supporting a series of aggressive interest rate increases. 
• While other recent data points have shown that at least the rate of inflation increases has diminished, the policymaker has highlighted the importance of having multiple months of this trend before accurately stating that inflation has already peaked. 
• The recent statements from the rate-setting Federal Open Market Committee indicated that 50 basis point rate increases are likely at the June and July meetings. Officials are then likely to evaluate the progress that the policy tightening and other factors have had on inflation. Mester said any pause in rate hikes was unlikely, although the scope of the hike could be scaled down.

(Source: CNBC)

• China's exports are expected to have expanded at a faster pace in May as factories reopened and supply chain disruptions calmed after Shanghai began to emerge from a lockdown, while imports also likely rose, a Reuters poll showed. 
• The recovery adds to evidence the world's second-largest economy has begun to chart a path out of the supply-side shock that rocked world trade and global markets. However, China's trade outlook faces risks from factors such as high raw material costs, uncertainties from the Ukraine war and as recovering production overseas affects demand for Chinese goods. 
• Shanghai's COVID-19 lockdown, which officially ended on June 1, snarled logistics and regional supply chains but there are signs of a turnaround. Official data showed the average daily container throughput at the Port of Shanghai rose 7% in May from a month earlier. 
• Exports in May likely grew 8.0% from a year earlier, accelerating from a 3.9% expansion in April, according to a median forecast in a Reuters poll of 28 economists. Imports were expected to have risen 2% year-on-year in May, the poll showed, likely driven by imports of raw materials and intermediate goods as domestic production resumed. That compared with flat growth in April. China's trade surplus is likely to have widened to $58Bn from $51.12Bn in April.

(Source: Reuters)

• As reported by the Planning Institute of Jamaica (PIOJ), the economy is estimated to have grown by 8.1% during fiscal year 2021/22. 
• This outturn, which falls within the entity’s target range of 7% to 9%, reflects improved performances in all goods producing and service industry subsectors, except mining and quarrying, which contracted by an estimated 39.8% owing to the closure of Jamalco and Alpart. 
• The expansion in economic activity for the fiscal year was spurred, in part, by an estimated 6.0% growth for the January to March 2022 quarter. 
• This outturn represented the fourth consecutive quarter of growth and reflected a continuation of the recovery trend, following contractions in the corresponding quarter [in 2021] as a result of the COVID-19 pandemic and associated public health and social measures implemented to manage its spread. 
• Additionally, the BOJ indicated that growth in 2022/23 is projected to be in the range of 2% to 4%, driven primarily by the resumption of the tourism sector.

(Source: JIS News)

• Delta confirmed that their seat capacity to Jamaica for 2022/23 is up 1% over the same period in the pre-pandemic 2019/20 year. The airline also confirmed the return of service from Detroit and Minneapolis for Winter 2022/2023 to daily service for the first time since the pandemic started. 
• This resumption of daily non-stop service from two of Delta’s key Midwest gateways for Winter 2022/2023 combined with a capacity increase over pre-pandemic levels is a distinct vote of confidence in the ongoing recovery of tourism to Jamaica,” said Donovan White, Director of Tourism, Jamaica Tourist Board. 
• This is a part of the country’s initiative to secure strong airlift and it is also a  clear indication that we are well on our way toward returning our stopover arrivals to growth over 2019, the year when we received our highest number of stopover visitors to date. 
• Delta is one of the top air passenger carriers serving Jamaica from the U.S. During peak winter seasons, it flies non-stop to Montego Bay’s Sangster International Airport (MBJ) from Boston, Minneapolis, New York, and Atlanta as well as to Kingston’s Norman Manley International Airport (KIN) from Atlanta multiple times each week.

(Source: Our Today & NCBCM Research)

• Fitch Solutions sees limited threats to political stability in the Cayman Islands over the coming quarters as pandemic risks fade and the country's economic recovery accelerates. The successful COVID-19 vaccination rollout should help pandemic risks to fade. As of May 23 91.4% of the population were fully vaccinated and 36.0% had received a booster dose. This strong inoculation rate will positively impact the rebound in tourism activity which will help economic recovery to gain momentum. 
• Against this backdrop, the Cayman Islands' Short-Term Political Risk Index (STPRI) score was revised to 68.8 out of 100, from a previous 68.1. This primarily reflects an increase in the 'policy continuity' sub-component score from 70.0 to 75.0 (out of 100), given the lower risk that the government will face political gridlock, and the policy direction is likely to remain broadly pro-business. However, the overall increase in the STPRI score reflects moderately higher risks of public protests in the face of rising inflationary pressures.
• Consumer price inflation rose to 7.6% y-o-y in Q4 2021, and this figure is expected to rise further during H1 2022. This comes as a result of the economy’s heavy dependence on imports, which leaves it exposed to elevated global commodity prices and supply chain disruptions caused by Covid-19 lockdowns and the war in Ukraine. 
• Although price pressures are expected to ease in H2 2022 on the back of an ease of the lockdown restrictions in Shanghai, Fitch forecasts average inflation of 6.9% in 2022, up from 3.3% in 2021. This will erode household purchasing power and weigh on domestic demand, putting pressure on the government to take action to soften the impact on living standards.

(Sources: Fitch Solutions & NCBCM Research)