• Germany has slipped into recession as last year’s energy price shock takes its toll on consumer spending. Output in Europe’s largest economy dropped 0.3% in the first three months of the year, following a 0.5% contraction at the end of 2022, official data showed Thursday.
• “The persistence of high price increases continued to be a burden on the German economy at the start of the year,” the office said. “This was particularly reflected in household final consumption expenditure, which was down 1.2% in the first quarter of 2023.”
• Claus Vistesen, chief euro-area economist at Pantheon Macroeconomics, said spending by consumers in the first quarter was crimped by “the shock in energy prices.” European energy prices were already rising when Russia’s invasion of Ukraine in February last year sent them soaring to record highs. Moscow then went on to throttle gas supplies to European countries, prompting Germany to declare an emergency.
• In a sign that Germany’s recession may prove short-lived, timelier survey data showed earlier this week that business activity in the country expanded again in May, despite a sharp downturn in manufacturing. German Chancellor Olaf Scholz described the outlook for the economy as “very good,” pointing to measures his government has taken in recent months to expand renewable energy production and attract foreign workers.
• However, Franziska Palmas, senior Europe economist at Capital Economics, forecast that German output would shrink again in the third and fourth quarters. The German economy is expected to shrink by 0.1% in 2023, according to the latest forecast from the International Monetary Fund.

 (Source: CNN Business)

• The Ministry of Tourism is taking steps to ensure Jamaica realises outturns projected for visitor arrivals and earnings over this year’s summer period, between June and August. Portfolio Minister, Hon. Edmund Bartlett, advised that Jamaica is forecast to welcome approximately 1.2 million visitors and earn some US$1.5 billion during the period, to make it the best summer in the industry’s history.
• He said the projected arrivals represent an 87.5% load factor of the 1.4 million airlift seats already secured, noting that the latter is a 16 percentage points increase over 2019. However, Mr. Bartlett said consequent on “certain negatives” and “headwinds” acknowledged, that could derail the projections, he will be leading a high-powered delegation to Jamaica’s top visitor source market, the United States, beginning the first week of June, for meetings with stakeholder counterparts.
• The Minister was speaking during the official opening of the new Sandals Dunn’s River Hotel in Mammee Bay, St. Ann on May 19. Mr. Bartlett said it is imperative that Jamaica remains proactive and doesn’t allow the industry’s current upward trajectory to taper off, particularly in light of the sacrifices made to revitalize tourism to pre-COVID-19 levels.
• Meanwhile, President of the American Society of Travel Advisors (ASTA), Zane Kerby, said Jamaica’s tourism product continues to be first-rate, noting that the new Sandals Dunn’s River property will add to the country’s allure. He said Jamaica is in a unique position, based on its association with Sandals International Resorts, pointing out that the 18,000 travel advisors who are members of the ASTA see both entities as one.
• He further highlighted that the island remains a top-10 destination for aspirational visits by Americans, citing as the main reasons “proximity, warm hospitality, crystal blue beaches, food, music, culture, and the attractions”.

(Source: JIS News)

• The Bahamas National Statistical Institute (BNSI) in its latest Consumer Price Index (CPI) report for March highlighted that the inflation rate in the country increased by 0.4% when compared to the 0.1% increase between January and February. The BNSI releases monthly reports on the country’s CPI.
• According to the BNSI, the breakout category of furnishing, and household equipment saw an increase of 6.5% when compared to February, while the miscellaneous goods and services category increased by 1.6%. The report further revealed that for March, clothing and footwear saw a decline of 0.9%.
• “On a year-over-year basis, the CPI rose 4% over the same period last year in 2022,” the report said. “The major categories that contributed to this rise included recreation and culture, alcoholic beverages, along with food and non-alcoholic beverages, with increases of 17%, 11% and 8% respectively.”
• The report also revealed that diesel prices were up 12% in March, while gasoline prices declined by 8% compared to the same period in 2022. However, when compared to February 2023, gasoline prices decreased by 9%, while diesel prices declined by only 2% in March.
• The inflation rate that peaked in 2022 (5.4%) has begun to steadily decline, though remaining above the historical average inflation of 2.1% per year (between 2002 and 2022).

(Source: The Nassau Guardian)

• Brazil's finance ministry forecasts a primary budget deficit of 136.2 billion reais ($27.22 billion) this year, compared to 107.6 billion reais projected in March, according to its bi-monthly revenue and expenditure report released on Monday.
• According to the report, this year's budget is 1.7 billion reais over the spending ceiling, indicating the government would need to find additional funds elsewhere.
• While Brazil's target for the 2023 primary deficit sits at 228.1 billion reais, Finance Minister Fernando Haddad has promised to reduce it to a deficit goal of around 100 billion reais, via spending cuts and seeking new revenue streams.
• This comes at a time when the government's proposed fiscal framework targets a zero primary deficit in 2024, followed by a primary surplus equal to 0.5% of GDP in 2025 and 1% of GDP in 2026 as mandated by the country’s new fiscal reform mandate.
• To achieve this goal, the government must balance public accounts by limiting spending to create a new horizon for economic and social development by declining debt while preserving social and investment spending over time.

(Source: Reuters)

• Bank of England Governor Andrew Bailey said he was concerned about the risk of "sticky and stubborn" inflation over the summer after data showed food prices still rising sharply despite a drop back to single digits for the headline inflation rate in April.
• Data published earlier on Wednesday showed the consumer price index rose by 8.7% in annual terms last month. That was down from 10.1% in March and a peak of 11.1% last October but was higher than expected by economists polled by Reuters.
• Bailey, speaking at a Wall Street Journal (WSJ) event, said the fall in April's inflation rate was "welcome" but the BoE had to focus on food prices which were up 19.0% over the 12 months to April and core inflation which gathered steam.
• Food companies had signed up for contracts that represented higher-than-usual costs after last year's energy price surge, meaning a fall in raw material prices could take a long time to work its way through to consumers.

(Source: Reuters)

• Federal Reserve officials were divided at their last meeting over where to go with interest rates, with some members seeing the need for more increases while others expected a slowdown in growth to remove the need to tighten further, minutes released Wednesday showed.
• Essentially, the debate came down to two scenarios. One that was advocated by “some” members judged that progress in reducing inflation was “unacceptably slow” and would necessitate further hikes. The other, backed by “several” FOMC members, saw slowing economic growth in which “further policy firming after this meeting may not be necessary.”
• While the future expectations differed, there appeared to be strong agreement that a path in which the Fed has hiked rates 10 times for a total of 5 percentage points since March 2022 is no longer as certain.
• FOMC officials also spent some time discussing the problems in the banking industry that have seen multiple medium-sized institutions shuttered. The minutes noted that members are ready to use their tools to make sure the financial system has enough liquidity to cover its needs. At the March meeting, Fed economists had noted that the expected credit contraction from the banking stresses likely would tip the economy into recession.
• They repeated that assertion at the May meeting, though they noted that if credit tightness abated, that would be an upside risk for economic growth. The minutes noted that the scenario for less impact from banking is “viewed as only a little less likely than the baseline.”
• Chair Jerome Powell weighed in last week, providing little indication he’s thinking about rate cuts though he said that the banking issues could negate the need for increases.

(Source: CNBC)

• Jamaica’s economy is estimated to have grown in the range of 4% to 5.5% for the fiscal year 2022/23. This outturn, according to Bank of Jamaica (BOJ) Governor, Richard Byles, is consistent with the range previously anticipated by the institution.
• Mr. Byles, who noted that the economy continues to grow strongly, indicated that the estimated outturn for the January to March 2023 quarter ranged between 3.5 and 4.5%. This, he pointed out, “is a faster growth rate than the 3.8% recorded for the October to December 2022 quarter”. However, this figure was below the outturn of 6.4% recorded in the January – March 2022 quarter.
• Mr. Byles said there are also signs that the economy continues to expand for the April to June 2023 quarter, and overall gross domestic product (GDP) growth for the fiscal year 2023/24 is projected to be in the range of 1 to 3%.
• He noted that the Bank expects that growth this year will be largely driven by the resumption of production at the JAMALCO alumina plant, supported by some improvement in agriculture and manufacturing production.

(Source: JIS News)

• The Dominican Republic's economy is expected to grow around 4% in 2023, the International Monetary Fund (IMF) said on Monday, May 22, slowing from the 4.9% increase in 2022.
• The economy is "one of the most dynamic and resilient in the Western Hemisphere over the last two decades," the IMF said in a statement, crediting the island nation's "sound" post-pandemic reforms.
• The strong recovery began moderating at the end of 2022 in response to tighter global financial conditions, lower global demand, and the appropriate withdrawal of policy stimulus, contributing to inflation's convergence to its target.
• The report noted that in the near term, policy priorities should remain focused on continuing to ensure macroeconomic and financial stability; and in the medium term, further enhancements to policy frameworks, the business climate, governance, and social safety nets can foster more inclusive growth.
• The fund said the economic outlook for the Dominican Republic is positive, though subject to high uncertainty, mostly global, with downside risks including further tightening global financial conditions and a sharper slowdown in global growth dominating the short run.

(Sources: IMF & Reuters)

• The inflation rate for TT for April was 7.3%, the Central Statistical Office (CSO) has published. This represented a decrease from the 7.8% recorded in March. However, this is up from the inflation rate of 4.3% for the comparative period last year.
• The Index for Food and Non-Alcoholic Beverages decreased from 146.1 units in March 2023 to 144.5 units in April 2023, reflecting a decrease of 1.1%. Contributing significantly to this decrease was the general downward movement in the prices of some agricultural produce. This is in line with the Central Banks' hopes for falling inflation.
• However, the full impact of these price decreases was offset by the general increases in the prices of chilled or frozen beef, fresh beef, chilled or frozen pork, onions, cheddar cheese, eddoes, whole fresh chickens, fresh steak, celery and carbonated soft drinks.
• At its meeting on March 31, 2023, the Central Bank of Trinidad & Tobago (CBTT) kept its repo rate at 3.50%; the rate has been fixed since March 2020.
• Currently, a ‘low and stable rate of inflation’ remains one of CBTT’s main objectives while shaping monetary policy. The expectation for continued ease in world food prices and shipping prices should aid with falling inflation in T&T in the coming quarters.

(Sources: Trinidad Express Newspapers & Fitch Solutions)

• The U.S. government could fall behind on its bills next month - and even default on its debt - if Congress doesn't raise a $31.4 trillion cap on government borrowing, a failure that could trigger economic calamity and panic on global financial markets.
• What follows is a timeline showing how a cascade of missed payments could unfold, based on the U.S. Treasury's warning that it could run out of cash as early as June 1, and daily tax receipts and spending obligations projected by the Bipartisan Policy Center, a Washington-based think tank.
• On June 1, US Treasury’s cash would be depleted and the US $21Bn in tax revenues would not adequately cover the promised US $101Bn in spending obligations promised by Congress. With debt principal payments coming due - including more than $100 billion on June 1 - the Treasury would borrow just enough to cover what's due and stay under the debt limit. If investors declined to lend that money out of fear they wouldn't get paid back, America could start missing payments and enter default on its debt, rocking the global financial system.
• On June 2, even if Washington kept paying debts on time, stock markets would likely be swooning. That could put pressure on Republican House Speaker Kevin McCarthy and Democratic President Joe Biden to act quickly.  Republicans, who control one chamber in Congress, are demanding steep spending cuts in exchange for their support for raising the debt ceiling.
• Without a deal, Pensioners and other Social Security beneficiaries wouldn't get the $25 billion owed them. States wouldn't receive the $2 billion they are owed for Medicaid health insurance subsidies for the poor.
• On June 9, more than a week into the crisis, it's possible some checks could finally go out. The U.S. Treasury would have collected about $105 billion in taxes since it stopped being able to add to the debt, enough to cover the bills from June 1. However, more bills would keep coming due, and schools expecting $1 billion in federal funding would have to do without.
• Things would get extra dicey on June 15 when the Treasury is due to pay investors about $2 billion in interest payments on the national debt. The Treasury said in 2014 - following another near-collision with the debt ceiling - that it is technically capable of prioritizing interest payments over other obligations. Provided that capability panned out, the day's inflow of business tax receipts would give the Treasury enough cash to make the debt payment. However, revenues wouldn't cover all the other bills due June 15, such as military salaries.

(Source: Reuters)