• Consumer spending bounced back sharply in January as rising inflation and a post-holiday surge kept cash registers ringing, the Commerce Department reported Wednesday. Retail sales for the month rose 3.8%, much better than the 2.1% Dow Jones estimate. 
• The numbers are not adjusted for inflation; the 0.6% rise in the consumer price index for the month helped push a reversal from the 2.5% sales decline in December, which was revised lower from the initially reported 1.9% drop. 
• On a year-over-year basis, retail sales overall rose 13%, pushed higher by a 33.4% surge in gasoline station sales and a 21.9% burst in clothing stores. The numbers came with the economy facing the worst inflation in 40 years, which helps feed into the retail sales numbers. 
• The Federal Reserve is expected to enact multiple interest rate hikes this year to combat rising prices, with markets looking for the central bank to boost its benchmark short-term borrowing rate by perhaps half a percentage point in March. 
• In nominal terms, real spending increased at a 3.3% annualized pace from October 2021 through January 2022, according to Capital Economics. However, the firm cautioned that, when adjusted for inflation, real spending actually declined at a 6.8% pace during the period.

(Source: CNBC News)

• Supply chain issues for homebuilders appear to be getting worse, and that is weighing on confidence in the industry. Builder confidence in the single-family, newly built housing market fell 1 point in February to 82 on the National Association of Home Builders/Wells Fargo Housing Market Index. That is the second straight month of declines, but anything above 50 is considered positive. 
• Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances. These delivery delays are raising construction costs and pricing prospective buyers out of the market. Surging lumber prices are also adding thousands of dollars to the cost of new homes. 
• Homebuyers are already contending with rising interest rates. The average rate on the popular 30-year fixed mortgage just crossed over 4%, well over a full percentage point higher than it was a year ago. Add higher rates to higher home prices, and some buyers are simply unable to afford it. This is why rental demand is currently so high. 
• Higher interest rates in 2022 will further reduce housing affordability even as demand remains solid due to a lack of resale inventory.

(Source: CNBC News)

• Supply chain issues for homebuilders appear to be getting worse, and that is weighing on confidence in the industry. Builder confidence in the single-family, newly built housing market fell 1 point in February to 82 on the National Association of Home Builders/Wells Fargo Housing Market Index. That is the second straight month of declines, but anything above 50 is considered positive. 
• Production disruptions are so severe that many builders are waiting months to receive cabinets, garage doors, countertops and appliances. These delivery delays are raising construction costs and pricing prospective buyers out of the market. Surging lumber prices are also adding thousands of dollars to the cost of new homes. 
• Homebuyers are already contending with rising interest rates. The average rate on the popular 30-year fixed mortgage just crossed over 4%, well over a full percentage point higher than it was a year ago. Add higher rates to higher home prices, and some buyers are simply unable to afford it. This is why rental demand is currently so high. 
• Higher interest rates in 2022 will further reduce housing affordability even as demand remains solid due to a lack of resale inventory.

(Source: CNBC News)

• For the month of January, the All-Jamaica Consumer Price Index (CPI) increased by 0.6%. January’s outturn meant that point-to-point inflation was 9.7% in the 12 months to January 2022, up from the 7.3% reported in December 2021. This puts inflation outside the BOJ’s target range of 4% to 6%, for the 6^th consecutive month. 
• For the month of January, the rise in inflation was largely driven by the 8.4% increase in the index for the ‘Restaurants and Accommodation Services’ division as tourism activity increased relative to the prior period. The inflation rate was also impacted by a 0.6% increase in the ‘Transport’ division which resulted from increased petrol prices. However, the rise in the point to point inflation rate was influenced by increased prices in the: Food and Non-Alcoholic Beverages (9.9%), Transport’ (13.8%) and Housing, Water, Electricity, Gas and Other Fuels (10.9%), divisions. 
• The current breach in the inflation range is in-keeping with expectations, as the BOJ noted on December 20, 2021, that inflation was projected to successively breach the target for the next 8 to 10 months. The elevated rates will likely be driven by continued transmission of high international commodity and shipping prices to domestic processed food, food-related services and energy price inflation, as well as a recovery in domestic demand. 
• The BOJ has already increased its policy rate by 200 basis points to 2.5% per annum, and it is anticipated that it will increase the rate further at its next policy decision meeting on February 18^th. This decision will be driven by the sustained expectation for future breaches of the inflation range. It will also be influenced by high inflation expectations for the 12 months ahead, which rose to 8.9% in the November Survey from 8.2% in the prior survey. Fitch Solutions currently forecasts another 25bps increase in the rate in 2022, but we expect the total rate hike for this year to surpass this amount.

(Source: Statin and NCBCM Research)

• JMMBGL reported a net profit attributed to equity holders of $8.28Bn for its 9 months ending December 31, 2021, which represents a 115.1% or $4.43Bn increase relative to the prior period. 
• All revenue lines increased, including net interest income, trading gains and fees and commission income. This was facilitated by increased economic activity relative to the prior period, as well as accommodative monetary policies for most of the period (since BOJ did not start raising rates until the last quarter of this 9-month period). 
• In particular, a growth in the loans and investment portfolios bolstered the 18.4% increase in net interest income, and an improvement in investor sentiments and demand for emerging market assets as global interest rates remained low, influenced the 44.7% increase in gains on traded securities. Fees and commission income was 58% higher and reflected increased economic activity as well as significant growth in managed funds and collective investment schemes across the Group. 
• The Group also recorded a 24.2% (or $2.58Bn) increase in operating costs as it transitioned to growth mode from a cost-containment strategy in the prior year, which was incorporated to dampen the effects of the pandemic. It was however able to convert the strategic spend into higher revenues relative to costs, as its operating revenues increased by 32.9%, and operating efficiency improved to 60.2% from 64.4%. 
• We expect JMMBGL to continue to benefit from the economic recovery in its main operating markets, in particular Jamaica and the Dominican Republic. Both economies are forecasted to experience real GDP growth of 5.5% and 2.7%, respectively, in 2022, which will help to fuel greater employment and corporate financial recovery, and in turn raise demand for financial services. It could realise an increase in net interest income from banking services as central banks have switched from their more accommodative policy. However, its securities business could simultaneously record reduced net interest income as its cost of funds may rise faster than its asset yields, contracting spreads and tempering the overall improvement in profitability. 
• JMMBGL’s stock price has increased by 11.8% since the start of the calendar year. The stock closed Tuesday’s trading session at $44.09 and currently trades at a P/E of 7.2x earnings which is below the Main Market Financial Sector Average of 15.1x

(Source: Company Financials and NCBCM Research)

• The Barbados Private Sector Association (BPSA) hopes the latest adjustments to the COVID-19 Directives mark the beginning of the end of harsh restrictions which severely affected the local business community over the last two years. 
• Association President, Trisha Tann, is pleased with what she believes is a clear indication of the Government’s intention to manage the pandemic and its economic effects much differently than before. 
• Highlighting the deleterious impact of the pandemic period on the business sector, Tannis acknowledged that the road to recovery would be long and winding. It is expected that full and sustainable recovery will still take another couple of years. This recovery will be dependent on the uptake of vaccine and a sustainable inclusive growth agenda that focuses on effectively, and holistically addressing the issues affecting the key growth sectors in Barbados, such as tourism and financial services. 
• Considering the recent move by the government, to lift restrictions, the association is of the view that the focus should now be on monitoring monetary policy to ensure that inflation remains at manageable levels.

(Source: Barbados Today)

• Head of state in Guyana, President Dr Irfaan Ali, has stated that Guyana and Barbados are working to create a success model for the region that will focus heavily on mitigating aspects of climate change and on enhanced food-security measures. 
• He noted that the two countries want to build a model of success for the rest of CARICOM, that will be able to address important issues and challenges being faced by all members, including climate change, environmental issues, water scarcity, food security, and the switch to renewable energy. 
• Both countries are working to remove the bureaucratic obstacles in order to provide a policy framework to enhance cooperation and movement of products and people through the Caribbean Community. This agreement between Guyana and Barbados will enhance the economic opportunities for both countries and ultimately benefit the Caribbean region.

(Source: Guyana Chronicle & NCBCM Research)

• U.S. producer prices increased by the most in eight months in January amid a surge in the cost of hospital outpatient care and goods such as food and motor vehicles, another sign that high inflation could persist through much of this year. 
• The producer price index for final demand jumped 1.0% last month, the biggest advance since May, after climbing 0.4% in December, the Labour Department said. 
• In the 12 months through January, the PPI rose 9.7%. That followed a 9.8% surge in December. Year-on-year PPI is slowing as last year's large increases drop out of the calculation.

(Source: Reuters)

• Oil tumbled over 4% from a seven-year high on Tuesday after Russia said some of its military units were returning to their bases after exercises near Ukraine, a move that appeared to de-escalate tension between Moscow and the West. 
• It was not clear how many units were being withdrawn, and by what distance, after a build-up of an estimated 130,000 Russian troops. The report on the troop movements prompted an extension of oil losses. Brent crude fell $3.99, or 4.1%, to $92.49 a barrel by 11:11 a.m. EST and the U.S. West Texas Intermediate (WTI) crude fell $4.28, or 4.5%, to $91.18 a barrel. 
• Both oil benchmarks hit their highest since September 2014 on Monday, with Brent touching $96.78 and WTI reaching $95.82. The price of Brent jumped 50% in 2021, while WTI soared around 60%, as a global recovery in demand from the COVID-19 pandemic strained supply.

(Source: Reuters)

• Buoyed by robust revenue growth(44.1%), Honey Bun reported a net profit of $ 45.51Mn for its 3 months ending December 31, 2021,  a 30.9% increase relative to the prior period. Sales of its Shorty Bread products, which continued to be well received by customers, were a significant driver of the expansion in revenues. 
• There was also a 64.5% rise in direct costs, in part due to the increased production. However, significant price increases on all inputs, supply shortages and shipping delays also contributed to the overall increase in direct expenses. The increase resulted in a reduction in the company’s gross margin by 7.5 percentage points to 39.81%. 
• Nonetheless, despite cost pressures, Honey Bun’s operating profit increased by 44.5%, as the rise in revenues outweighed the higher direct costs, administrative (+23.1%) and selling and distribution (17.2%) expenses, supporting growth in its bottom-line. 
• Going forward, Honey Bun is expected to see continued buoyancy in the demand for its products, but cost pressures are also expected to remain elevated. Demand will be driven by a recovery in both its domestic and international market segments. The relaxation of restriction measures in Jamaica along with expected real GDP growth will support sales growth along with economic recovery in key export markets such as the U.S. However, margins are expected to decrease owing to higher input price increases that are expected to continue throughout 2022 as energy prices increase and supply challenges persist. 
• Honey Bun’s stock price has increased by 7.6% since the start of the calendar year. The stock closed Monday’s trading session at $9.98 and currently trades at a P/E of 20.4x earnings which is almost in line with the Junior Market Manufacturing Sector Average of 20.9x.

(Sources: Company Financials & NCBCM Research)