• Consumer prices in Brazil fell by more than expected in the month to mid-July, data from statistics agency IBGE (The Brazilian Institute of Geography and Statistics) showed on Tuesday, as markets brace for an interest rate cut when the central bank monetary policy committee meets next week.
• In Latin America's largest economy, the Extended National Consumer Price Index fell 0.07% in the period, down from 0.04% in the previous month and below the 0.01% drop expected by economists polled by Reuters.
• That took 12-month inflation in the country to 3.19%, while economists had projected it to come in at 3.26%.
• The annual figure remains below the central bank's inflation target of 3.25% for this year, although an uptick is expected from this month because of unfavourable base effects.
• IBGE said the deflation in the month to mid-July was mainly driven by lower housing, food and beverage costs, whose declines were partially offset by an increase in transportation prices.

(Source: Reuters)

• Fitch Solutions is maintaining its FY24 real GNP forecast for Puerto Rico of a 0.6% contraction; however, it has revised Puerto Rico’s FY23 growth estimate from 0.5% to 1.0%.
• The Junta de Planificacion has published preliminary FY22 (July 2021 – June 2022) GNP data which came in at 3.7% growth, higher than Fitch’s estimate of 2.1%. This reflected stronger than expected private consumption (8.5%) and fixed investment (35.5%) growth, the latter supported by financial capital inflows from the US federal government.
• This has contributed to the upward revision of the 2023 estimate as Fitch believes that US financial flows will continue to contribute to the Puerto Rican industrial manufacturing sector, as well as the construction industry.
• Additionally, due to evolving expectations of a US economic recession starting in late 2023 or early 2024, Fitch expects weaker US demand in the latter half of FY24 will translate into headwinds for Puerto Rican exports and private consumption, while elevated interest rates will weigh on gross fixed capital formation.
• Risks to the growth outlook are balanced by the threat of a severe weather event through H223 and the rising likelihood of the US ‘soft landing’ in H124. The Fed has signalled that it may decide to shift its monetary policy stance, even if it does not see a significant uptick in unemployment, as long as the headline and core inflation start to moderate in the coming months. If this plays out, interest rates come down faster than expected and lower unemployment materializes in early 2024, which would support demand for Puerto Rican goods and tourism exports.

(Source: Fitch Solutions)

• U.S. stocks rose on Tuesday on investors' renewed enthusiasm for expected earnings reports from mega-cap technology companies Alphabet and Microsoft amid signs of economic resilience. A survey showed consumer confidence increased to a two-year high in July, amid continued optimism about the labour market despite worries about a recession.
• U.S. tech giants are expected to signal an end to a nearly year-long slowdown in their cloud businesses as technology spending and digital ads are likely to pick up. Investor fascination with artificial intelligence is a positive influence for mega-cap tech firms, said Steve Sosnick, chief strategist at Interactive Brokers. "When you have this much enthusiasm for a specific investing theme, you don't need much of a reason for markets to move. It's inertia."
• With the U.S. central bank on track for another 25-basis point interest rate hike on Wednesday, policymakers face a choice over how much weight to put on recent economic data. The tech-heavy Nasdaq Composite index has rallied nearly 35.2% this year, helped by outsized gains in rate-sensitive mega-cap growth companies on optimism over artificial intelligence and hopes of an end to the U.S. Federal Reserve's tightening cycle.
• "Tech sold off horribly in 2022, so it's no surprise that it has come back so strong because investors believe the Fed is either done or close to being done with its tightening cycle and that's all the market wants," said M. Jake Dollarhide, chief executive officer at Longbow Asset Management.

(Source: Reuters)

• The Bank of Canada's most favoured measures of core inflation is likely to slow in July for the first time in 10 months as base effects work in their favour, a milestone that could sway the bank to leave rates on hold at its next policy decision.
• In tracking core inflation, the BoC has been particularly focused on the annualized three-month rates of the weighted median and the trimmed mean, which filter out components with extreme price movements and are more timely than the year-over-year rates that are typically observed. The average of those two measures would drop in July below the 3.5% to 4% range it has been stuck in since September, so long as the monthly increases are not too hot - above 0.3%, for example - Reuters calculations show.
• The monthly increases for both measures have been 0.3% or less in seven of the last eight months. The exception was April. Helpfully, its heated readings will drop out of three-month calculations in July. Such an outcome could see the BoC returning to the sidelines at its next interest rate announcement on Sept. 6, said Benjamin Reitzes, Canadian rates & macro strategist at BMO Capital Markets.
• Holding rates steady in September would not guarantee the tightening cycle has ended, economists say, noting that monthly increases of 0.2% and less for the preferred core measures would need to become commonplace for inflation to move back to the BoC's 2% target.
• The BoC, which will release minutes from its July meeting on Wednesday, has said it doesn't want to tighten more than is needed. Money markets see a 25% chance of a September hike and are pricing in a 75% chance of a move by the end of the year.

(Source: Reuters)

• AMG Packaging & Paper Limited recorded a net profit of $32.56Mn for the third quarter that ended May 31, 2023. This represents a 19.2% yoy increase in profitability. However, despite this increase, profit for the nine months ending May 2023 decreased by 6.7% to $74.80Mn due to the fall-off in its quarter-one performance.
• Revenue for the quarter was up by 11.7% yoy to $281.02Mn. Similarly, revenues for the nine months increased by 5.9% yoy $781.84Mn.
• Gross profit for the quarter was up 39.7% to $88.57Mn while for the nine months ending May 31, 2023, it's up 17.8%. This was primarily driven by an increase in its property insurance as well as the major servicing of its corrugator.
• Despite this increase, gross margin improved to 31.5% (from 25.2%) and  29.9% (from 26.9%), over the three and nine months periods, respectively as the rate of the sales increase outpaced increases in manufacturing cost.
• Total expenses for the nine months ending May 31, 2023, increased by 25.0% yoy to $131.31Mn. Total expenses for the quarter increased by 20.6% yoy to $43.52Mn. The main contributing factors were the increase in depreciation as well as the cost associated with participating in the Jamaica Manufacturers and Exporters Association (JMEA) EXPO.
• AMG’s stock price has decreased by 13.5% since the start of the calendar year. The stock closed Tuesday’s trading session at $2.51 and currently trades at a P/E of 13.2x which is below the Junior Market Manufacturing Sector Average of 18.8x.
• The company recently pulled back from its plan to produce boxes made from recycled paper because the expected cost savings are anticipated to be slim. Additionally, the company has been challenged with the timely shipment of its raw material and has been closely monitoring the situation so that sales are not affected. As such, the company has around three months’ worth of inventory which should be able to sustain production until the next shipment arrives.

(Source: JSE)

• To finance several development projects as Guyana continues to progress rapidly, the Government of Guyana intends to increase the country’s debt ceiling, a Senior Minister within the Office of the President with responsibility for Finance, Dr. Ashni Singh has said.
• Dr Singh, during an interview with the News Room, said that the government has been making significant investments and managing the country’s finances responsibly.
• “Given all of these heavy investment initiatives and also ramping up of social programmes, we have of course been incurring a fiscal deficit, this is publicly known. It’s reflected in our annual budget every year, so you finance the budget deficit by borrowing, and we have been borrowing very prudently,” the minister said.
• With Guyana’s rapidly growing economy, it is pertinent that the country adjusts its debt ceiling.
• Guyana’s fiscal deficit is expected to widen from 2.2% of GDP in 2022 to 3.0% in 2023 given falling global energy prices and the government’s planned 41.4% increase in headline expenditure over the year. However, the country is anticipated to record a surplus (0.1% of GDP) in 2024 due to stabilising oil prices, persistent increases in hydrocarbon production and a lower debt-to-GDP ratio.
• This forecast is heavily hinged on a low debt load. Guyana’s debt-to-GDP ratio stood at just 25.8% in 2022, having fallen from a multi-year peak of 47.4% in 2020. Persistent fiscal surpluses from 2024 onwards imply that this ratio will stabilise in the years ahead, averaging 25.6% between 2023 and 2027.

(Source: Guyana Chronicle)

• Fitch Solutions has revised its 2023 growth forecast for Costa Rica from 2.9% to 3.2%, and is now projecting growth to slow to 2.5% in 2024.
•  The latest national accounts release shows that real GDP in Q123 performed better than initially expected, growing 4.5% y-o-y. This was underpinned primarily by a strong performance in exports, which grew by 15.8%, while private consumption and fixed investment both grew by 3.0%.
• Fitch’s upward revision is also supported by a strong performance of leading indicators in Q223. Expansions in the Monthly Index of Economic Activity (IMAE) have been accelerating in the last three months, with the latest growth rate coming in at 7.4% y-o-y in May.
• This is likely impacted by the Banco Central de Costa Rica’s (BCCR) dovish monetary policy stance, having already implemented three rate cuts since March 2023 as inflation has cooled sharply.
• The fixed investment will likely accelerate in the months ahead, while private consumption growth will remain fairly robust, further supporting growth in H223 and 2024 and adding to Fitch’s upward revision for 2023.
• That said, the deceleration in headline growth vis-à-vis H123 will be driven by softer export demand induced by the weakening of US growth in 2023 and 2024.
• Costa Rica’s key trading partner is the US, which serves as a destination for half of the market’s goods exports. Costa Rica also relies on the US as a source of tourists. US growth is projected to slow down from 2.1% in 2022 to 1.6% in 2023 and 0.6% in 2024 with a technical recession likely at the start of 2024, implying softer export demand for Costa Rica in the quarters ahead.

 (Source: Fitch Solutions)

• Sales of pre-owned homes dropped 3.3% in June compared with May, running at a seasonally adjusted annualized rate of 4.16 million units, according to the National Association of Realtors. Compared with June of last year, sales were 18.9% lower. That is the slowest sales pace for June since 2009.
• The continued weakness in the housing market is not for lack of demand. It’s all about a critical shortage of supply. There were just 1.08 million homes for sale at the end of June, 13.6% less than in June of 2022. At the current sales pace, that represents a 3.1-month supply. A six-month supply is considered balanced between buyer and seller.
• “There are simply not enough homes for sale,” said Lawrence Yun, chief economist for the Realtors. “The market can easily absorb a doubling of inventory.” That dynamic is keeping pressure on home prices. The median price of an existing home sold in June was $410,200, the second-highest price ever recorded by the Realtors. Last June’s price was the highest but by barely 1%.
• Sales are unlikely to recover anytime soon, as mortgage rates weigh heavy on affordability. The Realtors measure June sales based on closings, so contracts that were likely signed in April and May. Mortgage rates hung in the mid-6 % range during that time and then shot up over 7% at the very end of May. Rates stayed in the 7% range for all of June, as home prices rose.

(Source: CNBC)

• Wheat prices rose sharply Monday following a strike by a Russian drone on a Ukrainian port on the Danube River.
• Moscow’s drones attacked Ukraine’s port infrastructure overnight, targeting the country’s grain stocks, the Ukrainian Army said. One grain silo at the Reni port was hit and substantially damaged, according to geolocated images and video.
• Wheat futures on the Chicago Board of Trade jumped 8.5% to $7.57 a bushel, and corn futures rose 4.7% to $5.52 a bushel.
• Traders are concerned about tightening supply following the collapse of the Black Sea grain deal last week and a string of Russian drone attacks on Ukrainian port infrastructure.
• The deal — originally brokered by Turkey and the United Nations a year ago — had ensured the safe passage of ships carrying grain from Ukrainian ports. So far the pact has allowed for the export of almost 33 million metric tons of food through Ukrainian ports, according to UN data.
• Before the war, Ukraine was the fifth-largest wheat exporter globally, accounting for 10% of exports, according to the Organization for Economic Cooperation and Development.
• The White House said the Black Sea deal had been “critical” to bringing down food prices around the globe, which spiked after Russia invaded Ukraine in February last year. The global food price index compiled by the UN’s Food and Agriculture Organization hit an all-time high in March 2022 but has fallen steadily since then.
• Romanian President Klaus Iohannis said in a tweet Monday that the attacks on the ports in the Danube posed “serious risks to the security in the Black Sea,” adding that it would affect Ukrainian “grain transit and thus the global food security.”

(Source: CNN)

• Kingston Wharves Limited (KWL) has signed a 20-year deal with international club shopping company PriceSmart. The arrangement allows PriceSmart to enter a new lease to occupy a portion of KWL's 300,000-square-foot, Integrated Modular Logistics Complex at Ashenheim Road.
• The first phase of the complex is under construction and set for completion in the first quarter of 2024. PriceSmart will have access to the facility at the end of 2023 to complete its build-out.
• The agreement with PriceSmart represents a guaranteed 10-year lease arrangement, with the option of renewal in two five-year increments.
• Kingston Wharves’ CEO Mark Williams says this represents a strengthening of the company's ability to take on nearshoring opportunities. The completed facility will bring KWL's logistics and warehousing capacity to more than 600,000 square feet.
• With PriceSmart being a global brand, a partnership of this magnitude will establish KWL and by extension Jamaica as a more desirable nearshoring destination. Considering this, it could position KWL to take advantage of logistics opportunities that may arise. The logistics market was valued at about US$9.96Trn in 2022 and is expected to reach about US$14.37Trn by 2028. This has the potential to become a key driver of both top and bottom-line growth for KWL going forward.

(Source: RJR)