• Germany's annual consumer price inflation accelerated in May, advancing further above the European Central Bank's target of close to but below 2%, the Federal Statistics Office said on Monday.
• Consumer prices, harmonized to make them comparable with inflation data from other European Union countries, rose by 2.4% in May, up from 2.1% in April. A Reuters forecast had pointed to a May reading of 2.5%.
• The ECB's chief economist, Philip Lane, said earlier this month the bank had a "lot of work to do" to raise inflation back to its 2% goal and market talk of rapidly rising prices is misplaced.
• Euro zone inflation is approaching 2%, its fastest rate in years, on the back of fiscal support and the unwinding of last year's oil price crash, prompting some commentators to predict a new era of inflation.
• But Lane pushed back on this narrative, arguing that the labour market will take years to get back to its pre-crisis level, corporate balance sheets are depleted and the economic rebound is still predicated on copious central bank and government support.

(Source: Reuters

• For the year ended March 31, 2021, Future Energy Source Company Limited (FESCO) reported unaudited net profit of J$109.06Mn, a 4.1% increase over the 2019-20 financial year.
• Direct Cost, which was 1.67% (or J$96.07Mn) lower than last year, was the major driver of the improvement. FESCO’s performance comes against the background of a decline in the transportation fuel industry. The volume of litres of fuel sold contracted by 13.5% through the period April 2020 to January 2021, while FESCO’s grew by 10.6%.
• However, the improvement in net profit was tempered by an $82.82Mn (or 1.4%) yoy decline in revenues. Several factors affect revenue with the price at which the company sources fuel being a major component. FESCO has no control over the supply price of fuel and as such is a price taker. It instead, focuses more on volumes sold and maximizing gross margins. Its financial year ended March 2021 would have captured the full brunt of the pandemic when heightened mobility restrictions, remote work and curfew orders affected demand for fuel.
• Following its successful IPO and listing on the Junior Market in April 2021, the company will start benefiting from reduced (zero rated) corporate taxes in its new financial year that will end in March 2022. Additionally, as the local economy recovers, global travel accelerates, business confidence improves and as new service stations are added on Ferry and Beechwood Avenue in the next quarter, FESCO’s profitability is expected to improve.
• The stock has appreciated by 32.5% to $1.06 since it began trading at $0.80 on April 22, 2021. It now trades at a  P/E ratio of 26.5x earnings, which is below the Junior Market Distribution sector average of 34.0x earnings.

(Source: Company Financials)

• Minister of Transport and Mining, Hon. Robert Montague, says that the impending revitalization of railway service between downtown Kingston and Marcus Garvey Drive is expected to bring economic activities to the communities along the line.
• The train will stop in the communities along the line and allow persons to vend or offer other services, but no “big-box” stores will be allowed. “This is an opportunity for the ‘little-man’, and only people from these communities will be allowed to interact with passengers”, said the minister.
• The Minister said that there is also a plan to rent coaches to businesses to facilitate shopping while passengers ride. This, he said, would be the next project for the Jamaica Railway Corporation (JRC).

(Source: JIS News)

• The World Bank Board of Executive Directors approved today a US$100Mn COVID-19 Response and Recovery Development Policy Loan for The Bahamas. The operation will support the country’s efforts to provide COVID-19 relief and lay the foundation for a resilient economic recovery.
• The Bahamas has faced severe socioeconomic impacts due to the pandemic, which led to a sudden stop in tourism and an estimated economic contraction of 16.2% in 2020. Unemployment, which was already on the rise after Hurricane Dorian, increased further, and poverty is also estimated to have increased.
• This operation aims to help The Bahamas enhance COVID-19 relief and resilience, strengthen financial stability and the business environment, and improve fiscal sustainability and resilience. It includes measures to enhance unemployment benefits and provide food assistance to those workers and households most affected by the COVID-19 crisis, and measures to develop an inclusive vaccination policy.
• It also supports reform actions undertaken by the country to expand coverage of deposit insurance, strengthen the crisis management framework, strengthen public financial management, and improve governance of the Central Bank.

(Source: The World Bank)

• Disunity among Honduras’ opposition parties and a lack of a second round of voting increases the likelihood that the ruling Partido Nacional (PN)’s candidate, Nasry Asfura, wins the November 2021 presidential elections.
• However, Fitch Solutions notes that persistent links between Asfura and President Juan Orlando Hernández and criminal activities will place a ceiling on support for the PN, potentially limiting the ruling party’s policymaking ability. 
• A recent electoral reform will assuage some concerns about the legitimacy of the vote, though Honduras’ recent electoral history underscores significant risks of a disputed outcome and political unrest.

(Source: Fitch Solutions)

• Surging prices of raw materials means “margins are compressed,” explains Li, owner of Huizhou Baizhan Glass Co. Ltd., in the southern Chinese province of Guangdong, which makes about $30 million in annual revenue. With the global economic recovery still uneven, “the future is very unclear, so there is not much push to expand capacity,” he adds.
• The combination of higher input prices, uncertainty about export prospects and a weak recovery in domestic consumer demand meant Chinese manufacturing investment from January to April was 0.4% below the same period in 2019, according to official statistics (comparing to 2019 strips out the distortion of last year’s pandemic data).
• Due to the vast size of China’s manufacturing sector, that poses a risk both to the nation’s growth -- which is currently predicted to reach 8.5% in 2021, according to a Bloomberg tally of economists’ estimates -- and to a global economy that’s grappling with supply shortages and rising prices.
• Input shortages mean some manufacturers aren’t able to make use of their existing facilities, so expansion would be of little use.
• Additionally, weaker-than-expected investment could have a “sizable” impact on GDP growth this year, said Citigroup Inc.’s China economist, Li-gang Liu. Lower investment may dent imports of capital goods and equipment from developed economies like Japan and Germany, “which in turn could drag their economic recovery and rebound as well,” he added.

(Source: Bloomberg)

• JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon sharply criticized U.S. President Joe Biden’s proposed tax hikes, which are aimed at people making more than $400,000 as well as corporations
• At a House Financial Services hearing on Thursday, Dimon said the planned increases are “a mistake” that would ship capital and brains overseas. 
• “The tax increase is actually four times what the tax decrease was from 2017,” he said. “You all know the phrase the devil is in the details, well the details here are all that matter, not the top line of 28%,” he said, referring to Biden’s proposed corporate tax rate.
• Dimon, on Thursday said he’s worried about the ability of the U.S. firms to compete with those from other nations, “If you want to have a healthy, growing, competitive America against the rest of the world, you need a global, competitive tax rate,” he said. “It would be detrimental to a lot of companies, it would push a lot of capital overseas.”

(Source: Bloomberg)

• Minister of Industry, Investment and Commerce, Hon. Audley Shaw has said recently that the Caribbean Cement Company Limited’s (CCC) planned investment of another $1.75Bn will contribute to the continued development of the construction sector.
• The current plan is for the company to invest this sum of money over the next three years with the aim of improving its efficiencies and continuing to increase its capacity. This investment will bolster the continued growth in the construction sector as it has proven to be one of the few sectors that have shown consistent growth during the phase of the pandemic.
• The Minister had pointed out that the company has invested approximately $12.5Bn between 2016 and 2020 to expand its capacity and to increase production. This has resulted in CCC boosting its production capacity to 1.32Mn metric tonnes of cement per annum, the highest amount of cement it has produced in Jamaica. This activity in the construction sector will provide an opportunity for growth through investment in other areas such as housing.
• Supported by planned infrastructure and construction projects in 2021, we expect cement consumption to exceed last year’s figures. Additionally, at 14.4%, the potential upside on our current fair value estimate of $98.48 is marginally above the cost of equity of 14.1%. Therefore, NCBCM Research is now changing its recommendation on CCC from a HOLD to a BUY.

(Source: JIS & NCBCM Research)

• On May 13, policymakers at the Banco de México (Banxico) held the benchmark interest rate at 4.00%. This was the second consecutive hold for Banxico after a 425 basis point (bps) cutting cycle that began in August 2019 and accelerated in H1 2020 as the Covid-19 pandemic arrived.
• While Banxico expects higher inflation will be transitory as it reflects strong base effects and temporary goods shortages from logistical bottlenecks, Fitch Solutions believes that upside risks to price growth contrasted against a still-recovering economy suggest that the bank has limited room for maneuver in either direction.
• In addition, the agency sees a risk of increased financial market instability due to rising US bond yields and Mexico’s mid-term elections on June 6, which will further encourage Banxico to maintain its current stance. The bank’s statement reflected these pressures, striking a more cautious tone.
• That being said, Fitch Solutions maintains its view that Banxico will hold its benchmark rate at 4.00% through the end-2021 to support economic activity and investment before raising rates in 2022 by 25bps.
• The agency expects the bank will be cautious about raising borrowing costs amid the country’s economic recovery, particularly as the government has enacted minimal fiscal stimulus and an accommodative US Federal Reserve will ease upside pressure on Mexican interest rates in the near term.

(Source: Fitch Solutions)

• Brazil’s real will strengthen and the economy will beat expectations this year as privatizations, investment and structural reforms turn a cyclical rebound into a sustained recovery, according to Economy Minister Paulo Guedes.
• A long-delayed tax bill is making progress in the legislature while resistance to a planned overhaul of public sector careers is falling, the minister told Bloomberg News on Thursday, forecasting both proposals to be approved this year. While the first reform is designed to improve Brazil’s business environment, the second intends to reduce the costs of public servants over time.
• “As reforms make progress, everybody will see that the currency is mispriced, that it will strengthen,” Guedes said during a two-hour interview at his office in Brasilia. “The currency had an overshooting and is now finding its equilibrium.”
• The Brazilian currency lost about a quarter of its value in 2020 amid investor concerns about excessive public spending during the pandemic. A recent surge in commodity prices, coupled with aggressive interest rate hikes by the central bank and an improved fiscal outlook have helped to shore up the real in the past few weeks. It is now up about 5.8% since the end of March, the world’s best performing major currency.

(Source: Bloomberg)