• U.S. consumer prices rose slightly in August, but underlying inflation showed some stickiness amid higher costs for housing and other services, further dashing hopes of a half-point interest rate cut from the Federal Reserve next week.
• The mixed inflation report from the Labour Department on Wednesday followed data last week showing the labour market still cooling in an orderly fashion in August, defying fears of a sharp deterioration, with the unemployment rate retreating from the near three-year high touched in July.
• As a result, financial markets boosted the chances of a quarter-point rate cut next Wednesday and sharply lowered the probability of a 50 basis point reduction.
• The consumer price index increased 0.2% last month after rising by a similar margin in July, the Labor Department's Bureau of Labor Statistics said. The rise in the CPI was in line with economists' expectations.
• Food prices edged up 0.1% after climbing 0.2% in each of the past two months. Grocery store food prices were unchanged as increases in the costs of meats, fish, eggs and dairy products were offset by decreases in the prices of non-alcoholic beverages, fruits and vegetables.
• In the 12 months through August, the CPI advanced 2.5%. That was the smallest year-on-year rise since February 2021 and followed a 2.9% increase in July. Prices increased at a 1.1% annualized rate in the past three months, indicating that a disinflationary trend was now firmly entrenched, allowing policymakers to focus more on the labor market in their quest to sustain the economic expansion.

(Source: Reuters)

• The U.K. economy continued to flatline in July on a month-on-month basis, flash figures published from the Office for National Statistics showed Wednesday. Gross domestic product (GDP) also came in below the expectations of economists polled by Reuters, who had forecast growth of 0.2%. The country also logged no GDP growth in June.
• Britain’s dominant services sector showed slight growth of 0.1% in the month to July, while production and construction output fell by 0.8% and 0.4%, respectively. Britain’s economic growth was up 0.5% in the three months to July, slightly below economist expectations and the 0.6% recorded in the second quarter ending in June.
• “The economy recorded no growth for the second month running, though longer term strength in the services sector meant there was growth over the last three months as a whole,” Liz McKeown, director of economic statistics at the ONS, said. The U.K. economy has recorded modest but steady expansion almost every month so far this year, having emerged from a shallow recession at the start of the year.
• Lindsay James, investment strategist at Quilter Investors, said the prospect of tax raises could add further caution to consumer spending over the coming months.
• “Tax rises have been flagged ahead of the Autumn Budget, and consumers and businesses may feel rather more cautious heading into the winter months as they await details from the Treasury,” she said. She added that further movement in interest rates anticipated from the Bank of England could help ease wider growth pressures. The central bank is set to meet next week for its latest policy decision after cutting rates for the first time in four years last month.

(Source: Reuters)

• Jamaican growth appears to be slowing in 2024, undershooting prior downbeat projections of 2.4% (previously 2.6%), which raises some downside risk to social stability and, in turn, the popularity of the ruling Jamaica Labour Party (JLP) ahead of next year’s general elections, according to Fitch Solutions.
• Data from the Planning Institute of Jamaica (PIOJ) suggests that growth may have slowed to just 0.1% y-o-y in Q2 2024, following a real GDP growth of 1.4% in Q1 2024. Additionally, the PIOJ’s Q2 report found that July air arrivals were down 7.7% y-o-y, which indicates a slowdown in the tourism sector. The sector accounted for 29% of employment in Jamaica before the pandemic, according to the World Travel and Tourism Council. Against that background, Q3 2024 is unlikely to have brought much relief, given the onset of Hurricane Beryl in July.
• Crime will likely be a central topic in the 2025 elections, given Jamaica's high regional violent crime rate, notes Fitch Solutions. However, data from Jamaica's Constabulary Force indicates that from January 1 to August 31, murders have decreased by 15.8% y-o-y and shootings by 3.0%. Still, a slowdown in economic activity in the coming months may reverse these positive trends.
• Crime levels have been mostly consistent and may even be declining, but are still quite high relative to the rest of Latin America and the Caribbean, which also slightly increases social stability risks.
• Fitch notes that economic activity is likely to slow further than its previous expectations, influenced by the slowing US economy. Given the strong economic ties between Jamaica and the US, Fitch expects that this development could hinder JLP’s campaign in 2025. It went on to highlight that a moderating Jamaican economy can lead to higher crime rate, especially as unemployment increases (5.4% as at January 2024).

(Source: BMI Fitch Solutions)

• Minister of Science, Energy, Telecommunications, and Transport, Honourable Daryl Vaz, has announced that significant reductions in electricity bills are expected for the September billing cycle.
• This follows productive discussions held on September 9^th with the President of the Jamaica Public Service Company Limited (JPS), where it was confirmed that the necessary adjustments are being implemented in accordance with the Office of Utilities Regulation’s (OUR) directives.
• Minister Vaz expressed optimism about the upcoming changes, stating, “After discussions with the President of JPS this morning, he advised me that work began, today, for the September bill cycle. He confirmed that significant reductions should be seen, aligning with the OUR’s instructions and the government’s advocacy. I am hopeful that this month’s results will bring much greater satisfaction to our citizens compared to the previous month.”
• The anticipated reduction in electricity bills reflects the government’s ongoing commitment to address public concerns regarding energy costs, particularly since the passage of Hurricane Beryl in July this year. As the September billing cycle progresses, the government will continue to monitor the situation closely and ensure that JPS adheres to the prescribed adjustments.

(Source: JIS)

• Resilient economic activity, fiscal slippage and rising inflation expectations will see the Banco Central do Brasil (BCB- Brazil Central Bank) begin a modest tightening cycle over what is left of the second half of 2024 (H2 2024).
• Growth came in well above trend at 1.4% q-o-q (3.3% y-o-y) in Q2 2024. What made this print more impressive is that it followed a strong Q1 2024 growth figure of +1.0% q-o-q and came despite severe flooding that disrupted the harvest season in the south of the country in May
• According to Fitch Solutions, the economic strength is partially a reflection of rate cuts pushed through over H2 2023 and H1 2024 and still reasonably supportive fiscal policy, which have helped to underpin domestic demand.
• In terms of fiscal policy, the Lula administration’s budget proposals for 2025 (Fiscal tightening, with the primary deficit set to narrow modestly from 0.6% of GDP in 2024 to 0.4% per Fitch’s forecasts) suggest that it will again fail to comply with the fiscal framework that was unveiled in 2023, with revenue likely to disappoint relative to plan and little effort being made to rein in spending.
• The upshot of these developments is that Fitch now believes that the BCB will perform a policy U-turn in the coming weeks, with a mini hiking cycle that Fitch suspects will begin on September 18. It is expected that the Central Bank will raise the Selic rate from 10.50% to 11.50% by year-end, reversing roughly a third of the cuts implemented over the prior year.
• Going forward, space exists for the BCB to revert to loosening mode over 2025, as tighter monetary policy works to slow domestic demand and, in turn, inflation. However, incoming President Gabriel Galípolo is likely to move cautiously to build up his credibility with investors, who are wary of his ties to Lula.

(Source: Fitch Solutions)

• The new international airport in Barbuda is set to open in less than a month. The government of Antigua and Barbuda has announced that it has received the green light from the Eastern Caribbean Civil Aviation Authority (ECCAA) to commence commercial flights.
• The Cabinet shared that the Chairman and new CEO of the Antigua Barbuda Airport Authority (ABBA), Wendy Francette-Williams, gave them the positive news on September 4, 2024. They were informed that the old airport in Barbuda will close at sunset on October 2, 2024, and the new airport will officially open at sunrise on October 3, 2024.
• The new airport has undergone significant upgrades, with the government investing over US$14Mn. Enhancements include the construction of a 7,100-foot runway and ongoing training for fire service personnel, airport staff, and other key personnel.
• Antigua and Barbuda is poised to emerge as a beacon for high-end tourism in the Caribbean, and the completion of the Barbuda Airport holds substantial opportunities for the island’s tourism industry.
• Overall, the economy is poised to be a leader in tourism in the region, and this by extension will encourage greater foreign direct investment, particularly through construction initiatives. Furthermore, tourism growth will feed directly into domestic economic growth through increased domestic demand driven by higher private consumption.

(Sources: Caribbean Loop News & NCBCM Research)

• China's exports grew at their fastest pace in nearly 1 1/2 years in August, suggesting manufacturers are rushing out orders ahead of tariffs expected from a growing number of trade partners, while imports disappointed amid weak domestic demand.
• The mixed trade data highlights the challenge facing Beijing as policymakers try to bolster overall growth without becoming too reliant on exports, especially given the tightening of consumers' purse strings.
• Outbound shipments from the world's second-largest economy grew 8.7% year-on-year in value last month, the quickest since March 2023, customs data showed on Tuesday, beating a forecast 6.5% increase in a Reuters poll of economists and a 7% rise in July. On the other hand, imports increased by just 0.5%, missing expectations for a 2% boost and down from the 7.2% growth a month prior.
• Economists have warned that Beijing risks undershooting its growth target if it becomes too reliant on exports, following a series of lacklustre data, raising pressure on policymakers for more stimulus to revive China's economy. "The continued strong run of exports may actually delay near-term policy support, and we continue to expect bolder measures to be released in Q4," Nomura analysts said in a note.
• Outbound shipments to the European Union grew 13.4% in August year-on-year, which represented the biggest increase out of China's major export markets, followed by an 8.8% lift in sales to the Southeast Asian economies. Chinese exports to the U.S. rose by just an annual 4.9% last month but imports grew 12.2% over the same period, the most of any major import market.

(Source: Reuters)

• U.S. inflation-adjusted household income increased, but poverty rates showed only modest changes last year, the U.S. Census Bureau reported on Tuesday, offering a mixed snapshot of how American households fared as the economy returned to pre-coronavirus pandemic growth levels.
• Real median household income rose to $80,610 in 2023, up 4.0% from 2022, back to the peak reached in 2019, while earnings for workers were higher than before the pandemic, a boost to households after multiple years in which workers' wages were outpaced by high inflation.
• The report also showed a main gauge of the nation's poverty rate, adjusted for government support such as food assistance and tax credits as well as household expenses, rose to 12.9% from 12.4% in 2022. The so-called official poverty rate declined to 11.1% from 11.5%.
• The Census noted, however, that the adjustments to income levels used to determine whether a person lived in poverty were larger for the supplemental measure than for the official measure in 2023. Had the official threshold increase been applied for the supplemental rate, that rate would have declined to 12.0% from 12.4% the prior year. In 2023, the threshold for the official rate increased by 4.1% to $30,900 for a two-adult, two-child household.
• The supplemental child poverty rate, also adjusted and referring to those under the age of 18, rose to 13.7% in 2023 from 12.4% the previous year. The rise in the supplemental child poverty rates was impacted by the end of extra pandemic-related government benefits. For example, extra pandemic-related food assistance programs ended in March of last year in a majority of U.S. states, and school meal aid also narrowed.
• The income and poverty data for 2023 comes two months before the U.S. presidential election. The shadow cast by a surge in inflation following the onset of the pandemic in early 2020, and how much that has squeezed pocketbooks of voters once government support programs designed to shore up household incomes expired, remains a key issue.

(Source: Reuters)

• Indies Pharma created history by becoming the very first Jamaican Company to receive the U.S. Food and Drug Administration (USFDA) approvals for an ANDA (generic drug). The USFDA approved Indies’ abbreviated new drug application on the 22nd day of August 2024. The USFDA determined that the company’s “Regadenoson” is bioequivalent and therapeutically equivalent to Astellas Pharma U.S., Inc.'s Lexiscan® (Regadenoson Injection).
• Regadenoson injection is a pharmacologic stress agent indicated for radionuclide myocardial perfusion imaging (MPI) in patients unable to undergo adequate exercise stress.
• This drug approval will allow Indies to enter the US market of approximately US$400 Million. With an aim to commercialize this product in the United States by or before the end of 2024, the company has initiated the process of entering distribution arrangements with a few drug distributors in the United States.
• This was one of the company’s most anticipated drug approvals, which was originally scheduled for November 2024. However, it has been approved earlier than expected. A portion of the company’s bond funds, its growth capital, was used to develop this drug to gain entry into the US market.
• According to IQVIA, US sales of Regadenoson Injection, 0.4mg/5mL, were approximately US$668 Million per annum in the 12 months ending February 2023. With the approvals being granted for the generic versions, the dollar value for this particular drug in the United States is bound to decline, and it is speculated to fall to under US$400 Million per annum.
• The integration of these drugs into the US market is expected to support strong business growth and serve as a major earnings driver. Additionally, the company is also actively researching to identify new generic drugs to introduce into the US market.
• Indies’ stock price has decreased by 4.8% since the start of the calendar year. The stock closed Monday’s trading session at $2.76 and currently trades at a P/E of 14.4x, which is below the Junior Market Heath Sector Average of 16.0x.

(Sources: JSE and NCBCM Research)

• According to the Bank of Jamaica (BOJ), Jamaica’s Net International Reserves (NIR) stood at US$5,004.89Mn at the end of August 2024, reflecting a 1.2% (US$62.90Mn) reduction relative to July 2024 (US$5,067.79Mn). This marginal fall-off in the NIR can be attributed to a 1.2% (or US$61.84Mn) decline in total foreign assets along with a slight increase of US$1.06Mn in Foreign Liabilities.
• The dip in foreign assets reflects a fall in Currency and Deposits to US$3,412.48Mn from US$3,474.46Mn, and Special Drawings Rights (-46.6% or $18.58Mn). However, this was moderated by increases in Securities (+1.1%) and the IMF Reserve Position balance (+1.4%).
• The lower NIR came against the background of six interventions by the BOJ in the foreign exchange market during the month totaling US$180Mn.
• Still, the country’s NIR remains relatively high. The NIR for August translated to 25.3 weeks of goods & services imports (25.8 weeks at the end of July 2024). Compared to August 2023, the NIR increased by 14% (or $612.78Mn), up from $4,392.11Mn (24.0 weeks of imports). That said, at the current level, Jamaica’s NIR is more than double the international benchmark of 12-weeks of imports. 
• Maintaining an adequate level of reserves is one of the key pillars of underwriting and ensuring macroeconomic stability. This is important given that the country is small and vulnerable to a myriad of shocks due to its dependence on other economies, highlighted by the balance of payment deficit.
• The NIR reflects the difference between gross reserves and the country’s IMF loan debts. Gross reserves measure the total value of foreign exchange and monetary gold reserves, special drawing rights, IMF reserve positions, and other assets denominated in dollars.

(Sources: BOJ and NCBCM Research)