• Brazil, the world's top chicken exporter, has for the first time confirmed Highly Pathogenic Avian Influenza (HPAI) cases but only in wild birds, the Agriculture Ministry said on Monday, May 15.
• Two cases were detected in wild birds and should not trigger a ban on imports of Brazilian poultry products as per guidelines from the World Organization for Animal Health (WOAH), according to the Brazilian government.
• The avian influenza virus can kill entire flocks of birds and cause losses for the farming sector. Brazil's chicken exports rose by 27% last year to $9.76 billion as other countries reeled from a global outbreak of the virus, yet the South American country had never registered a case until now.
• Epidemiological surveillance services will be intensified to detect potential cases in wild and commercial animals in the area close to where the cases were confirmed, a government source said.
• The agriculture ministry said that because the cases were detected in wild animals, Brazil's status "as a country free of HPAI" was not affected.
• Notably, Brazil's neighbour Argentina suspended its poultry exports in late February after recording the first case of bird flu in its poultry industry in the southern Rio Negro province but resumed exports from bird flu-free areas in late March.
• As these developments continue to unravel, the possibility exists that other forms of protein such as Mutton or Beef, will experience increased demand as consumers shift from poultry and seek other alternatives. This bodes well for producers of alternative forms of protein such as Marfrig.

(Source: Reuters)

• U.S. retail sales increased less than expected in April, rising by 0.4% with some Economists forecasting sales rebounding by 0.8%. The underlying trend was solid, suggesting that consumer spending got off to a strong start in the second quarter, defying expectations of a recession this year.
• The smaller-than-expected rebound in retail sales last month reported by the Commerce Department on Tuesday likely reflected a moderate rise in receipts at auto dealerships, which some economists have said was because of lower prices. Receipts at auto dealers rose 0.4% after back-to-back decreases. "That adds to the signs that vehicle prices are now falling, weighing on the nominal value of sales," said Andrew Hunter, deputy chief Economist at Capital Economics.
• Nevertheless, higher borrowing costs and prices are taking a toll on consumers with sales at building material and garden equipment supplies dealers marginally increasing by 0.5% and online retail sales surging by 1.2%, likely due to price-conscious consumers continuing to seek discounts and deals.
• The rise in retail sales added to strong job growth in April suggesting that the economy was experiencing a spring revival after activity slowed in February and March. Spending is being underpinned by strong wage gains due to a tight labour market.
• "Outright declines in spending will be needed in the remaining two months of the second quarter to spur a contraction in real personal consumption," said Sal Guatieri, a senior economist at BMO Capital Markets in Toronto. "This risks another delay in the long-awaited recession, likely due to ongoing revenge spending, excess savings, and sturdy income growth."

(Source: Reuters)

• China's April industrial output and retail sales growth undershot forecasts, suggesting the economy lost momentum at the beginning of the second quarter intensifying pressure on policymakers to shore up a wobbly post-COVID recovery.
• Tuesday's batch of data, also showed a further decline in property investment which adds to concerns about the outlook for the world's second-biggest economy as both its domestic and export engines of growth remain underpowered.
• "Today's weaker-than-expected data show how difficult it is to keep the growth engine running after restarting it," said Bruce Pang, chief economist at Jones Lang Lasalle. Nomura economists took an even dimmer view: "As disappointment kicks in, we see a rising risk of a downward spiral, resulting in weaker activity data, rising unemployment, persistent disinflation, falling market interest rates and a weaker currency." "Year-over-year growth in Q2 may still look elevated, thanks to a low base, but sequential growth could experience a material decline," they said.
• Other data over the past week showing shrinking imports in April, deepening factory-gate deflation and worse-than-expected bank loans signalled weak domestic demand, raising pressures on policymakers to shore up the economic recovery as global growth falters. China's central bank kept the interest rate unchanged on Monday as expected, but markets are betting on more monetary easing in the coming months as the commodities data also highlighted pockets of weakness across the economy.

(Source: Reuters)

• For April 2023, the All-Jamaica Consumer Price Index (CPI) decreased by 0.4% when compared to the previous month. Most notably, this pushed the point-to-point inflation rate lower for April, and at 5.8% it is now within the BOJ’s target range of 4.0 to 6.0% for the first time since July 2021.
• For April, the decline in monthly inflation was largely driven by the 4.2% decrease in the index of the ‘Housing, Water, Electricity, Gas and Other Fuels’ division. It was lower due to declining electricity rates. There was also a decline in the index for the ‘Transport’ division which moved down by 0.1%, primarily because of reduced costs of petrol and air travel.
• The inflation rate was, however, tempered by a 0.6% increase in the index for the heaviest weighted division ‘Food and Non-Alcoholic Beverages’. This was due to higher prices for some agricultural produce such as sweet potato, yam, lettuce and tomato.
• The point-to-point inflation rate as of April 2023 was 5.8%. This was influenced mainly by the point-to-point inflation rate for the divisions: ‘Food and Non-Alcoholic Beverages’ (10.3%) and Restaurants and Accommodations Services’ (16.8%). These upward movements were, however, tempered by a 3.1% decline in the index for the group ‘Housing, Water, Electricity, Gas and Other Fuels.’
• On May 19, 2023, the BOJ will host its monetary policy meeting and we anticipate that the bank will continue holding the policy interest rateat 7.0% as inflation continues to abate due to the continued pass-through effects of previous rate hikes and food and energy prices continue to come down.

(Source: STATIN)

• TransJamaica Highway Limited recorded a net profit of US$4.98Mn for the first quarter that ended March 31, 2023. This represents a 639.0% increase in profitability year-over-year.
• Revenue for the quarter was up by 20.9% yoy to U$17.99Mn. This was attributable to the continued improvement in traffic following the lifting of the measures implemented to combat the spread of COVID-19, in addition to the annual increase in Toll Tariff which took effect in July 2022.
• The company incurred operating expenses of US$5.49Mn, reflecting a 43.8% decrease, compared to US$9.75Mn reported for the same period in 2022. This decrease was primarily due to cost savings realized following the acquisition of the toll operator, Jamaica Infrastructure Operator (JIO), and the subsequent reduction in the fixed operation fee. This was however partially offset by higher consultancy fees as the company has undertaken an exercise to restructure its operations, higher marketing costs associated with promoting the usage of ‘my t-Tag’ App, encouraging greater usage of the Tags, as well as higher insurance cost and security maintenance costs.
• TJH’s stock price has increased by 45.7% since the start of the calendar year. The stock closed Tuesday’s trading session at $2.04 and currently trades at a P/E of 19.9x which is above the Main Market Energy, Industrial, and Materials Sector Average of 15.0x.
• TransJamaica will continue to realise cost savings throughout the year as the change in the operating fee structure is expected to significantly reduce operating expenses by more than 50% (approximately US$12 million per annum). Net profit will therefore continue to outperform 2022 for the remainder of the year.

(Sources: JSE and NCBCM Research)

• Although the Caribbean region led the tourism rebound in 2022 and into the first quarter of 2023, achieving just 1% short of pre-pandemic overseas arrivals in the first quarter of 2023, new analyses suggest the region must sustain that attraction as more parts of the world lure travellers.
• An analysis by US travel insurance marketplace Squaremouth shows that eight of the ten most popular international destinations for key markets like the United States and Canada this summer are European countries.
• Additionally, tourism database company ForwardKeys noted the more competitive travel landscape in its recently released Caribbean Travel Trends report, released in conjunction with the Caribbean Hotel and Tourism Association (CHTA).
• The travel landscape is more competitive now that travellers have more choices, and due to pent-up demand for destinations that were previously off-limits or less accessible (South America, Southeast Asia), travellers may opt to visit those destinations this summer. The year 2023 could be considered the first year without COVID-19 for the tourism industry. The Caribbean destinations achieved a leadership position in the last years, now it is time
• Given these factors, the analysis suggested the region should capitalize on high-end Latin American travellers as it represents an exciting opportunity for the Caribbean through its near-shoring effects.
• Additionally, the report noted that Latin American travellers are willing to splurge on premium flight tickets (in particular, Ecuador, Peru, Colombia, Mexico, and Argentina) - and therefore, they are also likely to spend extra on travel services while at the destination which bodes well for the Caribbean tourism market.

(Source: The Nassau Guardian & CHTA)

• The U.S. Treasury Department reiterated Monday that it expects to pay the U.S. government's bills only through June 1 without a debt limit increase, increasing pressure on congressional Republicans and the White House to reach a deal in the coming days.
• In her second letter to Congress in two weeks, Treasury Secretary Janet Yellen confirmed that the agency will be unlikely to meet all U.S. government payment obligations by early June, triggering the first-ever U.S. default. The debt ceiling could become binding by June 1, she said.
• The new date reflects further data on revenues and payments received since Yellen's told Congress on May 1 that the Treasury would likely run out of cash to pay government bills in early June, and potentially as early as June 1. It comes a day before U.S. President Joe Biden is expected to meet House Speaker Kevin McCarthy for talks, and ahead of an overseas trip for the President that starts Wednesday.
• Yellen has repeatedly warned that failure by Congress to raise the $31.4 trillion federal debt limit could spark a "constitutional crisis" and would unleash an "economic and financial catastrophe" for the U.S. and global economies.
• The non-partisan Congressional Budget Office last week said the United States faces a "significant risk" of defaulting on payment obligations within the first two weeks of June without a debt ceiling hike, with payment operations uncertain throughout May. Some analysts, including the Congressional Budget Office, have suggested that Treasury could last as long as August without a default if it can access June 15 quarterly tax payments and new borrowing measures that become available June 30.

(Source: Reuters)

• Total consumer debt hit a fresh new high in the first quarter of 2023, pushing past $17 trillion even amid a sharp pullback in home borrowing. The total for borrowing increased nearly $150 billion, or 0.9% during the January-to-March period, the New York Federal Reserve reported Monday. That took total indebtedness up about $2.9 trillion from the pre-Covid period ended in 2019.
• That increase came even though new mortgage originations, including refinancings, totalled just $323.5 billion, the lowest level since the second quarter of 2014. The total was 35% lower than in the fourth quarter of 2022 and 62% below the same period a year ago. New home loans peaked at $1.22 trillion in the second quarter of 2021 and have been falling since as interest rates have increased. A series of Fed rate cuts helped push 30-year mortgage rates to a low of around 2.65% in January 2021.
• Borrowers had used the previously lower rates both to buy new homes and to refinance, the latter seeing a boom that appears to have ended. “The mortgage refinancing boom is over, but its impact will be seen for decades to come,” Andrew Haughwout, director of household and public policy research at the New York Fed, said in a statement accompanying the report.
• Fed data shows that about 14 million mortgages were refinanced during the pandemic period starting in March 2020. Some 64% were considered “rate refinances,” or homeowners looking to take advantage of lower borrowing costs. Average savings totalled about $220 per month for those borrowers, according to the New York Fed. “As a result of significant equity drawdowns, mortgage borrowers reduced their annual payments by tens of billions of dollars, providing additional funding for spending or pay downs in other debt categories,” Haughwout said.

(Source: CNBC)

• Salada Foods Jamaica Limited (SALF) recorded a net profit attributable to shareholders of $47.51Mn for the second quarter that ended March 31, 2023, marking a 17.8% yoy increase in profitability. However, the company’s bottom line for the six-month period decreased by 8.9% to $74.88n when compared to the same period in 2022.
• Revenues for the quarter rose by 14.0% yoy to $394.22Mn, driven by robust performance and growth across all distribution channels. Despite a 13.9% increase in the cost of sales to $272.13Mn, it was slightly outpaced by revenue growth. Consequently, the gross margin was slightly higher in the March 2023 quarter at 31.0% (March 2022: 30.9%). Revenue for the six months was up yoy by 8.3% to $688.26Mn. This improvement can be attributed to strategic forward purchasing of raw and packaging materials.
• Selling and Promotional expenses for the quarter amounted to $23.22Mn, a 57.7% increase from the $14.72Mn for the corresponding period of the previous year. For the six months, the expenses rose by 7.4% to $75.91Mn. This surge is due to the company’s aggressive support for expansion into new markets, and its pursuit of innovative strategies, product development and diversification. Product diversification is a key strategy to mitigate the ongoing adverse impact of an inconsistent supply of local green coffee beans.
• SALF stock price has decreased by 12.5% since the start of the calendar year. The stock closed Thursday’s trading session at $3.65 and currently trades at a P/E of 22.8x which is above the Main Market Distribution & Manufacturing Sector Average of 14.2x.
• The inconsistent supply of local green coffee beans, a crucial raw ingredient, continues to hinder industrial productivity and operational effectiveness at the company. During the reporting period, Salada partnered with the Jamaica Coffee Growers Association (JCGA) to launch a coffee sustainability initiative “Grounds for Growth”. This initiative focuses on repurposing Salada’s manufacturing bi-products into optimal organic fertilizing material to help improve the quantity and quality of production by local coffee farmers in a cost-effective manner.

(Sources: JSE & NCBCM Research)

• The Central Bank (Banco Central de la Republica Dominicana (BCRD) reported that consumer prices rose by 0.24% month-over-month (M/M), and 5.15% year-over-year (Y/Y) in April, reflecting a decline of 75bps since March and by 449bp from a year ago. Core inflation stood at 0.32% M/M, 5.83% Y/Y, down 33bps from March and 146bp from its May 2022 peak.
• The BCRD projects full convergence to the target range (4% +/- 100bp) during Q2 2023. It reiterated that the declining inflation trend was the result of restrictive monetary policy coupled with targeted subsidies for gasoline and electricity.
• In April, food and non-alcoholic beverages accounted for half of the monthly inflation, while transportation registered deflation. Tradable goods' inflation was 0.20% M/M, while non-tradable items recorded a 0.29% M/M inflation rate.
• The successful disinflation policy suggests that the Central Bank may soon start easing monetary policy. Fitch forecasts that the BCRD will continue to hold interest rates at their current levels until later this year when they are likely to initiate a rate-cutting cycle. Fitch also projects headline inflation to average 5.6% y-o-y in 2023, down from 8.8% y-o-y in 2022, and fall to 4.9% by the end-2023 – just within the BCRD’s target range.
• Additionally, the DR economy is expected to record 3.8% GDP growth in 2023, far below the pre-pandemic average of 6.1% between 2015 and 2019, signalling that elevated rates have had the intended effect on domestic demand.

(Sources: Oppenheimer & Fitch Solutions)