• Germany is likely in a recession now as external demand is weak, consumers remain cautious and domestic investment is held back by high borrowing costs, the Bundesbank said in a regular monthly report on Monday about Europe's biggest economy.
• The country has struggled since Russia's invasion of Ukraine pushed up energy costs, and its vast, industry-heavy economy is now in its fourth straight quarter of zero or negative growth, weighing on all of the Eurozone.
• "There is still no recovery for the German economy," the Bundesbank said. "Output could decline again slightly in the first quarter of 2024. With the second consecutive decline in economic output, the German economy would be in a technical recession."
• This weak performance has raised questions about the sustainability of the German economic model, and critics argue that much of its energy-reliant heavy industry is now being priced out of international markets, warranting an economic transformation.
• The government, however, has pushed back on gloomy projections, arguing that it is merely a perfect storm of high energy costs, weak Chinese demand, and rapid inflation that temporarily holds back growth, but does not fundamentally question economic strategy.
• Firms are also holding back investment, partly because financing costs have risen sharply since the European Central Bank pushed up interest rates to a record high to combat inflation, the central bank said. High nominal wage growth is also impacting firms, and strikes in key sectors, such as transport, could also weigh on growth in the quarter.
• While the outlook is weak, the bank said it expects no major deterioration in the labour market, which has insulated the economy so far, and Germany was not facing a broad-based, prolonged recession.

(Source: Reuters)

• Saudi Arabia's Finance Minister, Mohammed Al Jadaan, foresees non-oil growth to exceed 5% in the medium term, a slight reduction from the previous 6% projection, but still indicating robust growth in the economy.
• In alignment with Vision 2030, Saudi Arabia is intensifying efforts to diversify its economy away from oil. This involves a strategic focus on sectors such as tourism and industry, alongside initiatives to expand the private sector and stimulate job creation.
• The non-oil sector demonstrated notable resilience and growth, surpassing the oil sector in the preceding year. This marked outperformance significantly contributed to the overall expansion of the country's economy.
• Despite external challenges, including the COVID-19 pandemic and geopolitical risks, Saudi Arabia has exhibited economic resilience. Finance Minister Al Jadaan attributes this to comprehensive economic and social reforms, highlighting fiscal policies that successfully narrowed budget deficits from 15% to 2% or even lower. These reforms have positioned the country to better cope with external shocks.

(Source: Reuters)

• The average price paid for goods and services by Jamaican consumers decreased in January, as reflected in a 0.1% decrease in the All-Jamaica Consumer Price Index (CPI). The downward movement in the index for the ‘Food and Non-Alcoholic Beverages’ division (0.7%), as a result of lower prices for agricultural produce such as yam, Irish potato, cabbage, carrot, and tomato due to increased supplies, was the main driver of the decrease.
• Also contributing to the decline in the January 2024 CPI was lower transportation costs. The index for the ‘Transport’ division fell by 1.1% due to a reduction in the bus fare for adults charged by the Jamaica Urban Transit Company (JUTC) and lower fuel prices.
• However, the CPI movement was tempered by a 0.8% increase in the 'Housing, Water, energy, Gas and Other Fuels' index due to increasing charges for energy, water, and sewage. Additionally, the 'Recreation, Sport, and Culture' index increased by 1.5%, primarily due to increased ticket rates for films and stage shows.
• However, the point-to-point inflation rate (January 2023 – January 2024) rose to 7.4% from 6.9% in December. This was influenced mainly by the point-to-point inflation rate for the divisions: ‘Food and Non-Alcoholic Beverages’ (8.9%), ‘Transport’ (9.5%), and ‘Housing, Water, Electricity, Gas and Other Fuels’ (4.6%). The year-to-date inflation rate for the fiscal year was 7.3%, while the calendar year–to–date as of January 2024 was 0.1%.
• At its last monetary policy meeting in December, the BOJ kept the policy rate at 7.00% as it continued to monitor the pass-through effects of previous adjustments on deposit and loan rates. The next policy decision will be on the 20^th of February, when it is expected that BOJ will maintain its policy rate at 7.00%.

(Source: STATIN)

• Jamaica is on course to lower its debt-to-gross domestic product (GDP) ratio to 74% by the end of March 2024, says Prime Minister, the Most Hon. Andrew Holness. This, he noted, will be “well below pre-COVID-19 pandemic levels and the lowest in 25 years.”
• The Prime Minister was delivering the main address during the Jamaica Dental Association’s 60th annual convention at the Royalton Blue Waters Resort in Falmouth, Trelawny, earlier this week.
• Mr Holness, who highlighted that Jamaica's debt had previously increased to as much as 150%, stated that the reduction, as an economic indicator, would signal that the government has done extraordinarily well in terms of fiscal responsibility.
• Meanwhile, the Prime Minister said his Administration remains committed to continuing on a path of fiscal responsibility, fully aware of the hard work and sacrifices that were made in securing the notable economic gains Jamaica has recorded to date.
• As the government continues to lower the debt-to-GDP ratio, it expands its fiscal capacity to spend more on critical infrastructures such as hospitals and schools, which form the backbone of economic development. Additionally, the government may be required to borrow less to fund its expenditures, thus minimising the crowding out effect, and may be in a strong position to negotiate better financing terms from lenders.

(Sources: JIS & NCBCM Research)

• Given the challenges with the levels of productivity in Trinidad and Tobago (T&T), a four-day workweek may not be the best option for the country at this moment, according to the views of some of the country’s business leaders.
• Following the growing trend globally, Germany, Europe’s largest economy has just started a trial where employees from select companies will work for four days with the same salary. Similarly, in the Caribbean, The Dominican Republic and Barbados have also shifted to testing this model.
• The Employers’ Consultative Association (ECA), T&T’s largest employer-umbrella organisation in a statement to Sunday Business said it is not sure that the domestic economy is ready for the four-day workweek concept.
• “While in principle we are not opposed to the idea of a four-day work week, we are not certain that presently our economy is ready to embrace a shift of this magnitude and its potential challenges. The four-day work week has been mainly trialled within developed economies – which are often underpinned by high productivity rankings. Within the context of T&T, our mechanisms for measuring workplace productivity are lacking and so we do not have a full scope on where we stand as a nation.”
• The ECA also said that to its knowledge, no company in T&T has started such trials or has shown any interest in doing so.
• The ECA also noted that the success of a four-day workweek would depend on the robustness of existing labour policies that drive productivity, innovation, and competitiveness as well as the more implicit elements of a society such as norms and cultural values.

(Source: CariCris)

• Chile's central bank considered reducing the benchmark interest rate by either 100 or 125 basis points at its January meeting, with one rate setter thinking it was appropriate to analyse the option of 150 bps, the meeting minutes showed on Thursday.
• The Andean nation last month reduced its key rate by 100 basis points (bps) to 7.25%, with the monetary authority seeing inflation pressures easing. The cut, in line with estimates, was not a unanimous decision.
• However, the board members agreed that a larger cut "could be a big surprise that might generate unnecessary volatility," the statement added.
• One member said that a cut of 125 bps points or more was, in his view, "the best response to the macro scenario and reduced risks of inflation being lower than desired".
• The board members agreed that inflation was converging to the 3% target faster than had been expected some time ago.
• Despite the split vote, all members agreed that the proper implementation of monetary policy implied efficiently meeting the inflation target, at the lowest possible cost in terms of activity.

 (Source: Reuters)

• Britain's economy fell into a recession in the second half of 2023, a tough backdrop ahead of this year's expected election for Prime Minister Rishi Sunak, who has promised to boost growth.
• Gross domestic product (GDP) contracted by 0.3% in the three months to December, having shrunk by 0.1% between July and September, official data showed. The fourth-quarter contraction was deeper than all economists' estimates in a Reuters poll, which had pointed to a 0.1% decline.
• Thursday's data means Britain joins Japan among the Group of Seven advanced economies in a recession, although it is likely to be short-lived and shallow by historical standards. Canada has yet to report GDP data for the fourth quarter. Britain's economy stands just 1% higher than its level in late 2019 before the COVID-19 pandemic struck, with only Germany among G7 countries faring worse.
• Ruth Gregory, deputy chief UK economist at Capital Economics, said the GDP figures had more political significance than economic, with voters due to elect lawmakers in two constituencies on Thursday. "The news that the UK slipped into technical recession in 2023 will be a blow for the prime minister on a day when he faces the prospect of losing two by-elections," Gregory said.
• Of note, data on Wednesday showed inflation held at a lower-than-expected 4.0% in January, reviving talk among investors about a BoE rate cut as soon as June. However, strong wage growth reported on Tuesday underscored why the BoE remains cautious. Investors were pricing a roughly 68% chance of a first BoE rate cut at its June meeting.

(Source: Reuters)

• U.S. retail sales experienced the most significant drop in 10 months in January, with a 0.8% decline, primarily attributed to adverse weather conditions and challenges in adjusting data for seasonal fluctuations.
• The Commerce Department's report indicates a potential slowdown in consumer spending, as retail sales for November and December were revised lower. However, a tight labour market and elevated wage growth suggest that consumer spending is not collapsing.
• The severe weather conditions, including frigid temperatures and snowstorms, contributed to the decline in retail sales. Building material and garden equipment store sales, motor vehicles and parts dealers, and gasoline station receipts were particularly affected.
• Freezing temperatures also impacted factory production, with a 0.5% decline reported in manufacturing output. Despite these weak reports, expectations for the U.S. central bank to refrain from cutting interest rates before May remain unchanged.
• While import prices saw their biggest gain in nearly two years, online sales dropped in January, and core retail sales (excluding specific categories) decreased by 0.4%. Despite these mixed signals, economists believe that consumer spending will continue to rise at a solid pace, supported by a resilient labour market and growing household purchasing power.

(Source: Reuters)

• TransJamaica Limited recorded a net profit of US$23.86Mn for the twelve months ended December 31, 2023. This represents a 434.2% YoY turnaround in profitability, primarily bolstered by strong quarterly performances and significant cost savings throughout the year.
• For the Twelve months ending December 31, 2023, revenue was US$75.20Mn, reflecting an increase of 15.7% compared to US$65.06Mn for the same period in 2022. The significant increase was due to greater traffic levels over the previous year and movements in the toll tariff, which is reviewed annually.
• Operating expenses for the twelve months improved to US$22.44Mn or 43.8% from US$39.91Mn in 2022. This was primarily due to cost savings that continue to accrue to TJH from the acquisition of the subsidiary, Jamaican Infrastructure Operator (JIO), which allowed for the modification of the fees, thus reducing its cost to operate. This was, however, partially offset by bank and security charges incurred, higher maintenance costs, including spares and equipment purchased to improve the services, cost for renovation works that are currently being done at the Portmore Toll Plaza, and higher Insurance costs associated with the renewal of its coverage for the motorway.
• The Group’s administrative expenses primarily comprised of staff costs, plant and equipment depreciation, and other routine office expenses, came in at US$8.36Mn for the full year (FY). This represents a rise of US$6.61Mn relative to US$1.75Mn for FY 2022, influenced by subsidiary’s staff and related costs and increased consultancy fees.
• The acquisition of JIO has resulted in a one-time settlement loss of US$13.88Mn; however, TransJamaica stands to gain from future cost savings as this transaction has significantly reduced its Operating Expenses by more than 40% for the twelve months and increased its profitability which is expected to continue in subsequent years. Furthermore, increased traffic flows have bolstered and will continue strengthening the company’s topline.
• In addition, TJH has the first right of refusal to maintain and operate the May Pen to Williamsfield leg of Highway 2000 and is currently in negotiations with the government regarding the concession. If the company is successful in securing the concession, we anticipate that it will provide an additional boost to TJH’s revenues and profitability, as the road is a major thoroughfare along the south coast and will significantly reduce travel time to Kingston from Mandeville for motorists.
• TJH’s stock price has increased by 17.7% since the start of the calendar year. The stock closed Tuesday’s trading session at $3.19 and currently trades at a P/E of 10.29x below the Main Market Energy, Industrial, and Materials Sector Average of 12.42x.

(Sources: JSE and NCBCM Research)

• Mailpac Group Limited (“Mailpac Group”), one of Jamaica’s leading businesses in e-commerce logistics and solutions, announced that it has agreed to acquire MyCart Express (“MyCart”), the fastest-growing and second-largest courier company in Jamaica.
• This strategic transaction not only positions the combined entity as the largest courier platform in the Caribbean, delivering over 1.5Mn packages annually, but also merges the complementary management, service offerings, and geographic footprint of both entities to deliver superior growth to stakeholders.
• Following the transaction, the Board of Directors plans to hold an extraordinary general meeting to propose rebranding Mailpac Group as MyPac Group. MyPac will operate multiple e-commerce brands, including Mailpac (premium courier), MyCart (value courier), ‘Pack Yuh Barrel’ (digital barrel packing and shipping), and Mailpac Local (local online purchasing).
• The Group will be led by a management committee consisting of Khary Robinson and Garth Pearce of Norbrook Equity Partners Limited ("Norbrook"), Mark Gonzales and Samantha Ray of Mailpac, and Kamar Palmer and Aldane Smith of MyCart. The management of each brand will stay unchanged.
• In addition to doubling the size and capacity of Mailpac Group, the transaction will see the owner-operators of MyCart becoming shareholders of the publicly listed company, significantly adding to the innovation and execution capacity of the Group. Mailpac and MyCart will also strategically focus on their core market segments with appropriate services and pricing.
• Khary Robinson, also the Executive Chairman of Mailpac Group, highlighted that this transaction marks a pivotal moment in the logistics sector, with MyPac poised to deliver exceptional courier services across Jamaica and the Caribbean. He further noted that the combined expertise, resources, and innovative approaches of Mailpac and MyCart create a formidable force that will shape the future of logistics in the region.

 (Source: JSE)