• The U.S. central bank's 50 basis-point (bps) interest rate cut last month was an acknowledgement that its policy rate was "out of sync" with where the economy stands, but not a sign that the battle with inflation is finished, Richmond Federal Reserve President Thomas Barkin said on Wednesday. However, President Barkin also said that of a further 50bps Fed cut over the rest of the year further "takes a little bit of the edge off.
• Barkin, a voter on the Fed's interest rate policy this year, supported the 50bps cut delivered by the U.S. central bank on Sept. 18.  The Fed is expected to cut rates by 25bps at its Nov. 6-7 meeting, a move that would lower the benchmark rate to the 4.50%-4.75% range.
• Before that meeting, the U.S. government will have released the employment reports for September and October and inflation data for September. Fed policymakers also will have to assess any fallout from the ongoing port strikes affecting the U.S. East Coast and Gulf Coast, and also the risks inherrent in the intensification of Middle East conflict.
• Barkin said he remains cautious about inflation amid continued strong economic growth, and felt the job market could grow tighter rather than weaker in the months ahead. "There is still work to do on inflation," Barkin said, noting that the personal consumption expenditures price index stripped of volatile food and energy items, or core PCE, is still at 2.7%. He said he does not expect it to decline much more until next year.
• The Fed targets an annual headline inflation rate of 2%. The core PCE figure is considered a guide to how the headline rate will behave in the future. Barkin said that while some aspects of the economy make it seem that "disinflation" will continue, "it remains difficult to say that the inflation battle has yet been won."
• U.S. labour unrest and geopolitical conflicts could push up prices. Additionally, the job market may move in unexpected ways, Barkin said. While much of the Fed's discussion has been about preventing the current 4.2% unemployment rate from rising further, Barkin argued that if the economy continues to grow and demand increases, "employers running lean could well find themselves short" of workers and need to hire.

(Source: Reuters)

• U.S. manufacturing held steady at weaker levels in September, but new orders improved, and prices paid for inputs declined to a nine-month low. The improvement coupled with falling interest rates bodes well for a rebound in activity in the coming months.
• The Institute for Supply Management (ISM) said on Tuesday that its manufacturing Purchasing Managers' Index (PMI) was unchanged at 47.2 last month. A PMI reading below 50 indicates a contraction in the manufacturing sector, which accounts for 10.3% of the economy.
• It was the sixth consecutive month that the PMI remained below the 50 threshold, but above the 42.5 level that the ISM said over time generally indicates an expansion of the overall economy. The survey has, however, exaggerated the weakness in manufacturing, with the so-called hard data, such as factory production and durable goods orders, showing the sector largely moving sideways.
• Gross domestic product data last week showed manufacturing output rising at a 2.6% annualized rate in the second quarter, an acceleration from the 0.2% pace posted in the January-March quarter. Further gains are likely after the Federal Reserve cut interest rates last month for the first time since 2020.

(Source: Reuters)

• Minister of Tourism, Hon. Edmund Bartlett, says Jamaica has proactively prepared its citizens to seize emerging opportunities within the tourism industry. He noted that the ministry has been equipping the populace to take advantage of the myriad opportunities, especially in leadership roles,” he told JIS News.
• The government has implemented a variety of innovative educational programs aimed at enhancing the skills and qualifications of individuals aspiring to occupy senior positions within the sector. “We recognise that a well-trained workforce is essential for the sustainability and growth of our tourism industry. Our educational programmes are designed to empower individuals with the knowledge and skills necessary to excel and lead in this dynamic field,” he said.
• He emphasized that the initiatives undertaken by the Ministry and its public agencies have showcased the transformative potential of tourism, generating opportunities for the population and solidifying Jamaica’s status as a “first-rate and first-choice” destination.
• Additionally, the Tourism Innovation Incubator, established through the Tourism Enhancement Fund (TEF), seeks to identify and cultivate innovative ideas that have the potential to transform Jamaica’s tourism sector. Minister Bartlett noted that this year the program received 222 applications up from the 34 applications submitted in its inaugural year in 2022.
• Growth in the sector is estimated to have decelerated in Q2 2024 to 0.1% from 6.1% in Q1 and it is expected to have weakened in the immediate aftermath of Hurricane Beryl. Despite challenges posed by the hurricane, Jamaica’s tourism sector has shown resilience, welcoming more than 105,000 stopover visitors since the reopening of ports. As such, tourism growth could reaccelerate in H2 amid a favourable revision to the US travel advisory in July 2024, coupled with continued efforts from public and private stakeholders to improve the tourism product and appeal to international travellers.

(Source: JIS & NCBCM Research)

• Monthly output prices for producers in the Mining & Quarrying industry increased by 0.5% for August 2024 relative to July 2024, while prices in the Manufacturing industry fell by 0.7%.
• The upward movement in the index for the Mining and Quarrying industry was attributed to a 0.5% increase in the index for the major group ‘Bauxite Mining & Alumina Processing’. The other major group, ‘Other Mining & Quarrying’, increased by 0.1%. The contributing factor to these increases was the depreciation of the Jamaican dollar relative to the United States dollar.
• On the other hand, a 4.5% decrease in the index for the major category ‘Refined Petroleum Products’—attributed to lower crude oil prices in the international market—was the primary factor behind the decline in the Manufacturing industry index. However, this overall decrease was offset by a 0.1% increase in the index for the major group ‘Food, Beverages & Tobacco.’ This increase was mainly driven by rises in the indexes for the categories ‘Manufacture of Grain Mill Products, Starches and Starch Products’ (0.1%) and ‘Manufacture of Other Food Products’ (0.2%), resulting from general price increases and higher raw material costs.
• For the period August 2023 – August 2024, the point-to-point index for the Mining & Quarrying industry increased by 7.7%, reflecting a similar increase of 7.7% in the index for the major group ‘Bauxite Mining & Alumina Processing’.
• The Producer Price Index (PPI) is a significant economic indicator that tracks the average fluctuation in selling prices that domestic producers of goods and services experienced over time. Currently, the only industries being tracked are Manufacturing Industry and Mining and Quarrying.
• With international oil prices being a key driver of the ‘Refined Petroleum Products’ category, geopolitical tensions could have a material impact on the Manufacturing industry index in the near-to-medium term, if it results in a material rise in oil prices.  
• The impact has been limited since the onset of the Hamas-Israel conflict last year. However, oil prices climbed about 8.3% since Tuesday after Iran fired a salvo of ballistic missiles at Israel in retaliation for Israel's campaign against Tehran's Hezbollah allies in Lebanon. This increase highlights how rapidly escalating geopolitical conflicts in the Middle East can disrupt global energy markets.

 (Source: STATIN & NCBCM Research)

• The Bank of Mexico's governing board may consider larger cuts to its benchmark interest rate going forward as inflation in Latin America's second-largest economy cools, bank governor Victoria Rodriguez told Reuters on Monday, September 30.
• Banxico, Mexico’s central bank, lowered its key rate by 25 basis points (bps) to 10.50% last Thursday, the second consecutive cut as price pressures ease. Banxico previously cut rates by 25 bps in March.
• Banxico will announce its next monetary policy decisions on November 14 and December 19. However, the latest rate cut approved by Banxico's five-member governing board was not unanimous. Deputy Governor Jonathan Heath voted to hold the rate at 10.75%.
• Mexico's annual headline inflation slowed to 4.66% in the first half of September, official data showed, its fourth consecutive fortnight of decline. Core inflation also moderated to 3.95%, its lowest level since early 2021.
• "The adjustment to the inflationary outlook indicates to us that it's appropriate to reduce the level of restrictive monetary policy, though we also recognize we continue to face challenges," said Rodriguez. "The inflation outlook has been improving significantly. Last week, Banxico revised its forecast for annual headline inflation in the fourth quarter slightly downward to 4.3%, from 4.4% previously, while also adjusting its expectations for core inflation to 3.8% from 3.9%.

(Source: Reuters)

• On September 30, 2024, the Honourable Colm Imbert, Trinidad and Tobago’s (T&T’s) Minister of Finance, delivered his tenth National Budget presentation under the theme “Steadfast and Resolute: Forging Pathways to Prosperity”.
• T&T’s projected deficit of TTD5.52Bn continues to be a concern given the still heavy reliance on its energy sector. However, the T&T economy grew by 1.3% in 2023 and 1.9% in 2024. These are promising signs despite a contraction of the energy sector and geopolitical tension, which directly impact local and international trade.
• With revenue projected at TTD54.224Bn and expenditures at TTD59.74Bn, the budget deficit will be TTD5.52Bn based on an oil price assumption of US$77.80 per barrel, a natural gas price assumption of US$3.59 per MMBtu and anticipated oil revenue of TTD14.17Bn.
• Some takeaways from the budget presentation include investments in Health (TTD7.57Bn), followed by education (TTD7.51Bn) and national security (TTD6.11Bn). Additionally, the minimum wage for public sector employees is set to be increased by 9.8% from TTD20.50 to TTD22.50, following a 17.0% increase in January 2024.
• The budget contemplates the phased rollout of property taxes after the suspension of the Land and Building Tax Regime in 2010 and the granting of a Tax and National Insurance (NIS) Amnesty, allowing taxpayers to regularise outstanding tax obligations and ensure compliance. Other takeaways from the budget include plans to issue interest-bearing VAT bonds to alleviate the significant backlog of VAT refunds owed to businesses, and tax-exempting electric vehicle charging equipment and sporting equipment.
• Given the paucity of its proven energy reserves, T&T needs to diversify the economy away from the energy sector. The Minister highlighted diversifying initiatives like expanding trade agreement networks and granting further incentives to propel the agricultural, tourism, manufacturing and other sectors.
• That said, the government continues to rely heavily on the energy sector, despite acknowledging the need to insulate T&T from the volatility of energy sector revenue contributions.
• Overall, the Government is faced with the unenviable task of maintaining economic stability by focusing on, among other things, infrastructural development, security and diversification, while addressing current vulnerabilities.

(Source: PWC)

• Tens of thousands of dockworkers have gone on strike indefinitely at ports across much of the US, threatening significant trade and economic disruption ahead of the presidential election and the busy holiday shopping season. Members of the International Longshoremen's Association (ILA) walked out on Tuesday at 14 major ports along the East and Gulf coasts, halting container traffic from Maine to Texas.
• President Joe Biden has the power to suspend the strike for 80 days for further negotiations, but the White House has said he is not planning to act. The White House said that President Biden and Vice President Kamala Harris were monitoring the strike closely. "The President has directed his team to convey his message directly to both sides that they need to be at the table and negotiating in good faith - fairly and quickly."
• Union boss Harold Daggett has called for significant pay increases for his members, while voicing concerns about threats from automation. He has indicated the union wants to see per-hour pay increase by five dollars per year over the life of the six-year deal, which he estimated amounted to about 10% per year.
• Time-sensitive imports, such as food, are likely to be among the goods first impacted. The ports involved handle about 14% of agricultural exports shipped by sea and more than half of imports, including a significant share of trade in bananas and chocolate, according to the Farm Bureau. Other sectors exposed to disruption include tin, tobacco and nicotine, Oxford Economics said. Clothing and footwear firms, and European carmakers, which route many of their shipments through the Port of Baltimore, will also take a hit.
• More than a third of exports and imports could be affected by the strike, hitting US economic growth to the tune of at least $4.5bn each week of the strike, according to Grace Zemmer, an associate US economist at Oxford Economics, though others have estimated the economic hit could be higher. She said more than 100,000 people could find themselves temporarily out of work as the impact of the stoppage spreads.

(Source: BBC)

• U.S. job openings unexpectedly increased in August after two straight monthly decreases, but hiring was soft and consistent with a slowing labour market. Job openings, a measure of labour demand, rebounded by 329,000 to 8.040Mn by the last day of August, the Labour Department's Bureau of Labour Statistics said in its Job Openings and Labour Turnover Survey, or JOLTS report, on Tuesday.
• Data for July was revised higher to show 7.71Mn unfilled positions instead of the previously reported 7.67Mn. Economists polled by Reuters had forecast 7.66Mn job openings. Hires slipped by 99,000 to 5.317Mn. Layoffs declined by 105,000 to 1.608Mn.
• The Federal Reserve last month cut its benchmark interest rate by an unusually large 50 basis points (bps) to the 4.75%-5.00% range, the first reduction in borrowing costs since 2020, in a nod to rising concerns over the labour market's health.
• Fed Chair Jerome Powell said at a National Association for Business Economics conference on Monday that "labour market conditions have clearly cooled over the past year," but added, "this is not a (Federal Open Market) committee that feels like it is in a hurry to cut rates quickly." The Fed is expected to cut interest rates again in November and December. The focus now shifts to the employment report for September which is due to be released on Friday.
• Nonfarm payrolls likely increased by 140,000 jobs last month after rising by 142,000 in August. That would be well below the average monthly gain of 202,000 jobs over the past 12 months. The unemployment rate is forecast to be unchanged at 4.2%. It has risen from 3.4% in April 2023 as a surge in immigration boosted labour supply.

(Source: Reuters)

• At its meetings on September 26 and 27 2024, Tha Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC) unanimously agreed to further reduce the policy rate by 25 basis points (bps) to 6.50%, effective Wednesday, 01 October 2024. This will be the BOJ’s second consecutive rate cut in as many months.
• The reduction in the policy rate comes mere days after the US Fed cut its policy rate by 50bps and is timely given the sharp slowdown in economic activity in Q2 to 0.1% from 1.4% in Q1 and the negative impacts of Hurricane Beryl, especially on the agricultural sector.
• Despite a rise in consumer prices in  August 2024, stemming from the impact of Hurricane Beryl, the BOJ expects that headline inflation will return to its target range earlier than initially forecasted.
• The BOJ’s outlook largely reflects the possibility of a lower-than-anticipated impact of Hurricane Beryl on agricultural supplies.
• Furthermore, the measure of core inflation that excludes the prices of agricultural food products and fuel was 4.3% in August 2024, continuing the decline in underlying inflation since the start of 2024. Core inflation was 5.9% in January 2024, 9.7% in January 2023 and 7.1% in January 2022.
• The MPC now anticipates a temporary uptick in headline inflation over the next 2 to 3 months in the context of the current active hurricane season, which ends in November.
• The MPC's decision was influenced by the anticipated impact of Hurricane Beryl on the Jamaican economy and the delayed effects of monetary policy on spending. However, the BOJ forecasts that real economic activity for FY2024/25 will be more favourable than previously expected, thanks to a less severe estimate of Hurricane Beryl's effect. Still, the MPC believes that future interest rate adjustments will be gradual and depend on incoming data.
• Over the past two years, many local sectors have faced challenges due to high interest rates. It is anticipated that these gradual reductions will enhance economic activity, which may subsequently facilitate a rebound in the stock market. However, this effect is likely to be delayed, as it generally requires approximately 18 months for changes in interest rates to fully work through the economy.

 (Source: BOJ, NCBCM Research)

• The agricultural sector, which suffered significant damage during the passage of Hurricane Beryl, is on the road to recovery owing to decisive action by the Government of Jamaica (GOJ) and the resilience of farmers and fisherfolk.
• This was noted by Minister of Agriculture, Fisheries and Mining, Hon. Floyd Green, as he provided an update on the Hurricane Beryl Recovery Programme in the House of Representatives on September 24.
• Mr. Green said that, to date, almost $900Mn has been allocated through the Rural Agricultural Development Authority (RADA) to execute the Hurricane Beryl Recovery Programme.
• “I am pleased that the Government was able to allocate an additional $1.4 billion towards the Hurricane Beryl Recovery Programme,” he pointed out. The Minister said the funds have been directed towards providing seeds, fertilisers, livestock, infrastructure rehabilitation, and technical assistance to farmers and other critical activities.
• Mr. Green reported that assessments reveal that 14,370 farmers across the parishes of St. Elizabeth, Manchester, Clarendon, St. Catherine, Westmoreland, Trelawny, and St. Ann have directly benefited from this program through RADA. This initiative not only supports farmers in their recovery but also strengthens the agricultural community as a whole, fostering resilience and sustainability in the face of future challenges.
• Although the sector is on the path to recovery, adverse weather conditions associated with the hurricane season continue to pose a risk that could disrupt this progress. Minister Floyd Green has indicated that over 100 farmers have been affected by the recent heavy rainfall across Jamaica.

(Source: JIS &NCBCM Research)