• Euro zone inflation surged to a 10-year-high in August, with further rises likely, challenging the European Central Bank's benign view on price growth and its commitment to look past what it deems a temporary increase.
• Consumer inflation in the 19 countries sharing the single currency accelerated to 3% this month from 2.2% in July, far above expectations for 2.7% and moving well clear of the ECB's 2% target.
• The increase was fuelled by energy costs, but food prices also surged, while there were unusually large increases in the prices of industrial goods too, according to Eurostat, the EU's statistics agency.
• Markets mostly shrugged off the data, with stocks rising and yields increasing just a basis point or two, suggesting the narrative of temporary inflation and ultra-easy central bank policy for years to come remains the central one.

(Source: Reuters)

• Data from the April 2021 labour market survey indicates that more than half of the 151,100 persons who lost their jobs in July 2020, during the initial stages of the COVID-19 pandemic, have been reinstated according to Planning Institute of Jamaica (PIOJ) Director General, Dr. Wayne Henry.
• The unemployment rate for April 2021 was 9.0% compared with a rate of 7.8% in April 2019. This figure amounts to about 84,400 persons. No survey was undertaken in 2020 due to COVID-19 as such the unemployment rate for April 2020 is unavailable. Notably, a decline in the labour force by 40,500 persons to 1,206,000 in April, relative to the same period in 2019 contributed to the improvement in the unemployment rate. When compared with January 2020 when Jamaica recorded its pre-COVID-19 employment high, employment levels have improved and have been doing so since July 2020, as the economy gradually reopened and restrictions were relaxed.
• The PIOJ expects pre-COVID-19 employment levels should be attained in the fiscal year 2022/23. This will be influenced by continued recovery in the tourism sector, and higher private consumption, which will drive the demand for goods and services and the need for labour to facilitate their production. Notwithstanding, the spread of the delta variant of the coronavirus has resulted in tightened restrictive measures including earlier curfews and no movement days. This may force employers to cut staff hours or even lay off some workers and cause a rise in the unemployment rate.

(Source: JIS News & NCBCM Research)

• Fitch Solution has revised its Grenadian real GDP growth forecasts to 1.4% in 2021 and 6.6% in 2022, from 5.5% and 3.8% previously, reflecting the prolonged impact of the COVID-19 pandemic on the tourism and services sector. Real GDP contracted by an estimated 13.8% in Grenada in 2020 as global mobility restrictions severely depressed international tourism.
• It is anticipated that global tourism will be slow to recover in the coming quarters due to the rising threat of COVID-19 variants, which will dissuade potential travelers from visiting smaller economies such as Grenada.
• That being said, the reopening of St. George's University and continued government stimulus will underpin modest growth in H221 before a stronger rebound in 2022.
• The revised forecasts imply the Grenadian economy will not fully recover until 2024, broadly in line with other Caribbean markets that rely on tourism to drive growth.

(Source: Fitch Solution)

• Barbados’ economy remains severely depressed by the ongoing global coronavirus pandemic. While tourism is expected to recover gradually in the second half of 2021 and the first half of 2022, risks to the outlook remain.
• Despite this very challenging environment, Barbados continues to make good progress in implementing its ambitious and comprehensive economic reform program, while expanding critical investments in social protection.
• Indicative targets under the Fund-supported program for end-June 2021 were met, and since then international reserves have been further boosted by the recent global SDR allocation.

(Source: IMF)

• U.S. and global equity benchmarks hit all-time highs on Monday, as the Federal Reserve appeared in no rush to step away from its massive stimulus. The S&P 500 and Nasdaq also rose to all-time highs as dovish remarks from the Fed last week bolstered optimism in an economic rebound and eased fears of a sudden tapering in monetary stimulus.
• The S&P 500 gained 0.43%, to 4,528.76 and was on track to finish the month up more than 3%, and the Nasdaq Composite added 0.9% to 15,265.72 as investors jumped into technology stocks. High-growth tech stocks tend to benefit from expectations of lower rates because their value rests heavily on future earnings.
• The Europe-wide STOXX 600 rose 0.07% and was on course to end August with a rise of more than 2% its seventh month of gains in what would be its longest such winning run in over eight years. Asian stocks hit a two-week high and Japan's blue-chip Nikkei closed up 0.5%.
• Overall the positive sentiment in equity markets was underpinned by the Fed Chair Jerome Powell speech in which he said that the tapering of stimulus measures could begin this year. Additionally, it was due to the announcement that there will be no immediate change in interest rates after its bond tapering. 

(Source: Reuters and NCBCM Research)

• Oil prices rose for a third straight day on Monday but settled slightly off their highs as Hurricane Ida’s influence on U.S. energy installations weakened after making an initial powerful landfall. New York-traded West Texas Intermediate, the benchmark for U.S. oil, settled at $69.21 per barrel, up 47 cents, or 0.7%. It hit $69.34 at the session highs.
• Oil’s highs for the day were also limited by reports that producer group OPEC+ was going ahead with a planned production hike for September despite a recent resurgence of Covid cases across the world that could once again weigh on energy demand.
• “Crude prices are stuck in wait-and-see mode until the energy traders have a better handle of what will be the full impact of Hurricane Ida with US production,” said Ed Moya, analyst at New York’s OANDA. “Airlines across the board are cutting their schedules and the plateau for air travel is in place. Concerns are brewing that we might not see strong holiday demand.”
• Industry officials initially estimated that it could take weeks for supplies to normalize. But as the storm weakened, many adjusted their expectations, with some even worrying whether a drop in demand for air travel could weigh instead on oil prices going forward.

(Source: Investing.com)

• The Americas continues to be the epicentre of the pandemic and more than 101.0Mn children across Latin America and the Caribbean have been hit harder by school closures than their peers in any other region.
• Considering this, school reopening is a priority for governments, but the Pan American Health Organization (PAHO) is recommending that member countries adopt a phased approach to reopening schools for face-to-face learning in the 2021/22 academic year, in light of the still evolving coronavirus pandemic.
• This approach should take into consideration the local epidemiological situation, which can change rapidly. Proper surveillance will also be critical to ensuring that reopening is done safely and that the learning environment remains safe.
• Before reopening schools, countries must ensure institutions can maintain COVID-19 prevention and infection control measures, including physical distancing, hand hygiene, and mask-wearing. This will help to prevent schools from becoming a catalyst for more COVID-19 community transmission.
• The safest way to reopen schools rests on countries’ abilities to suppress transmission through vaccination and the implementation of public health measures. The Jamaican government has begun to vaccinate children. However, if it is unable to vaccinate a significant portion of the student population and to contain the recent spike in the infection rate, it could delay the restart of in-person teaching.
• The potential persistence of school closures will continue to depress traffic activity adversely affecting the transportation sector and companies like TJH. It would also continue to affect revenue generation for some manufacturing and distribution companies such as Honey Bun and Purity which rely heavily on sales to schools.

(Source: JIS News & NCBCM Research)

• Private sector credit growth in Latin America is expected to slow in the quarters ahead according to  the Fitch Rating Agency as central banks across the region tighten monetary policy to clamp down on rising inflation.
• Moreover, financing needs will subside relative to 2020, when pandemic-induced losses boosted credit demand among households and businesses. Data through Q420 show strong private sector credit growth throughout 2020. In particular, H120 saw a surge in credit growth as households and businesses, supported by government stimulus measures, sought to cover losses amid the onset of the pandemic.
• Most Latin American central banks cut their policy rates to all-time lows and launched extraordinary monetary stimulus measures to support credit flows to households and businesses and prevent financial instability amid the crisis.
• That being said, recovering economic activity will likely place a floor underneath the slowdown in credit growth as businesses borrow to expand production amid rebounding demand and falling unemployment boosts household incomes.

(Source: Fitch Solutions)

• Brazil's Supreme Court on Thursday ruled that a law granting the central bank autonomy was constitutional, guaranteeing monetary policymakers a freer rein to tackle rising inflation after leftist opposition parties sought to strike down the measure.
• The 8-2 ruling is a boost for the credibility of monetary policy under President Jair Bolsonaro. Brazil's central bank has hiked interest rates aggressively to tame surging inflation amid an uneven economic recovery from the world's second-deadliest coronavirus outbreak.
• The law does not change how the bank sets interest rates but distances it from politics by setting fixed four-year terms for its governor and directors that will no longer coincide with the presidential election cycle.
• Bolsonaro has reportedly regretted enacting the law as sharp rate hikes threaten to hurt the economy next year when he runs for re-election. The bank's policymakers have also made indirect criticism of his efforts to raise public spending to win votes.
• Central bank sources told Reuters they were aware the president was unhappy with the law but said the bank had not faced any pressure from the president on policy autonomy.

(Source: Reuters)

• Southeast Asia’s bond and currency traders can afford to be less worried about a potential stimulus tapering by the Federal Reserve, with their markets better positioned to withstand external shocks this time around.
• Massive foreign reserves and undervalued currencies could shield the region’s markets from a potential selloff if Fed Chair Jerome Powell hints at tapering bond purchases at the Jackson Hole symposium this week.
• While there’s caution, analysts aren’t expecting a repeat of the so-called 2013 taper tantrum where the Fed’s surprise announcement to unwind stimulus roiled global markets.  
• “Partly due to the taper tantrum in 2013, Southeast Asia’s central banks now have better foreign-exchange-reserve cushions,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank Ltd. in Singapore. “The degree of Treasury curve steepening appears far more subdued this time around, which may be conflated with reduced pressure for the capital flight out of Emerging-Asia.”

(Source: Bloomberg)