• The U.S. economy grew faster than expected in the second quarter, but inflation subsided, leaving intact expectations of a September interest rate cut from the Federal Reserve.
• Gross domestic product increased at a 2.8% annualized rate last quarter, the Commerce Department's Bureau of Economic Analysis said in its advance estimate of second-quarter GDP on Thursday. Economists polled by Reuters had forecast GDP rising at a 2.0% rate. Estimates ranged from a 1.1% rate to a 3.4% pace. The economy grew at a 1.4% rate in the first quarter.
• The economy, which continues to outperform its global peers despite hefty rate hikes from the Fed in 2022 and 2023, remains supported by a resilient labor market even as the unemployment rate has risen to a 2-1/2-year high of 4.1%.
• The personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increased at a 2.9% rate after surging at a 3.7% pace in the first quarter, welcome news for U.S. central bank officials ahead of their two-day policy meeting next week.
• The Fed has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range for the past year. It has hiked its policy rate by 525 basis points since 2022. Financial markets expect three rate cuts this year, starting in September.
• Despite the solid economic growth pace, the outlook for the second half of the year is hazy. The labour market is slowing, which will have an impact on wage gains.

 (Source: Reuters)

• British business activity picked up this month after a lull in the run-up to a July 4 election, bolstered by the fastest manufacturing growth in two years and the strongest inflow of new orders since April 2023.
• The figures may cheer Prime Minister Keir Starmer's new government - which is targeting faster growth to allow higher public spending - and the Bank of England too, as inflation pressures fell to their lowest in more than three years.
• Although growth so far this year has exceeded most forecasters' expectations, Britain's economy has performed relatively poorly since the COVID-19 pandemic. Among the Group of Seven rich economies, only Germany has done worse, as it took an even bigger hit than Britain from the surge in European natural gas prices, which followed Russia's full-scale invasion of Ukraine in 2022.
• There were, however, positives in July's S&P Global Flash Composite Purchasing Managers' Index as it rose to 52.7 from June's six-month low of 52.3, a shade higher than the 52.6 forecast in a Reuters poll of economists. The result was also stronger than the same survey for the eurozone, which fell to 50.1 from 50.9, below all economists' forecasts and within a whisker of recessionary territory.
• However, consultancy Capital Economics estimated that the PMI reading was only consistent with a quarterly growth rate of 0.2% in July, below the robust pace of 0.6%-0.7%, which they forecast for the three months to the end of June.
• Britain's economy grew just 0.1% last year. The International Monetary Fund forecasts 0.7% growth for 2024. The BoE will publish new inflation forecasts on Aug. 1, but investors have scaled back bets that it will cut interest rates from their 16-year high of 5.25% after data last week showed services price inflation and wage growth remained high.

(Source: Reuters)

• The Government plans to tap $5Bn from its disaster risk financing resources to address the immediate relief and recovery efforts related to Hurricane Beryl.
• Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, made the disclosure during a Statement to the House of Representatives on Tuesday (July 23). “We plan to disburse $1.3Bn to the Ministry of Economic Growth and Job Creation to finance programmes announced by the Prime Minister last week, and we plan to disburse $1Bn to the Ministry of Labour and Social Security,” Dr. Clarke said.
• “Any expenditure beyond this amount that falls into this fiscal year will be financed from the proceeds of donations and the donations which have been pledged thus far,” he added. The Minister informed that all expenditures undertaken in relation to Hurricane Beryl will be represented in the First Supplementary Estimates to be tabled later this year.
• Meanwhile, Dr. Clarke said he has been informed by the Caribbean Catastrophe Risk Insurance Facility (CCRIF) that Jamaica’s tropical cyclone and excess rainfall policies have been triggered with payout amounts of US$16.3Mn (J$2.5Bn) and US$10.3Mn (J$1.6Bn), respectively. He further noted that the path and intensity of Hurricane Beryl did not trigger Jamaica’s catastrophe bond.
• “As such, the disaster risk financing resources available to the Government, due to the pre-financing of disaster risk, totals approximately $10.9Bn, made up of $5.3Bn in the contingencies, $4.1Bn from CCRIF, which is to come; $1Bn, which we have budgeted for the National Natural Disaster Risk Fund; and National Disaster Fund of $500Mn,” Dr. Clarke highlighted.

 (Source: JIS)

• Senior financiers in Jamaica’s banking system say “migration and unexpected expenses” are amongst the top two reasons why people are late to pay their loans each month. An increasing number of Jamaicans are falling behind on their regular monthly loan payments, but the central bank says it is not yet worried.
• The data captured in the figures are for past-due loans, which are loans that have not been paid from anywhere between 30 days to 89 days. The migration of individuals who obtain loans from banks with no intention of repayment has become a significant concern for the banking industry. While it is understood that debt does not vanish upon relocation, the process of debt collection becomes increasingly difficult for lenders when borrowers move abroad.
• Due to the distinct credit systems and regulations of each country, tracking individuals who migrate can pose a challenge for creditors. Although reports suggest that a particular group of Jamaican migrants may be more responsible than others, the group has not been identified. In general, migrants recorded as overseas residents were behind on payments amounting to $6.8Bn as of March.
• Actors in the banking sector manage growth in past due loans by promptly contacting borrowers through emails and phone calls soon after loans become overdue. The introduction of credit bureaus in Jamaica has had a positive impact by making people aware of the consequences of non-payment on their credit history. This awareness has influenced behavior as individuals now consider how it could affect their ability to secure loans in the future.
• Overall “The stock of these loans on the balance sheet of the deposit-taking institutions grew by 32.1% to $42.9Bn in March 2024 from $32.5Bn in March 2023,” the central bank said. Further data show past due loans rose again to $50.1Bn by the end of April before declining to $41Bn at the end of May.
• However, the Bank of Jamaica (BOJ) said the increase in past due loans must be looked at in the context of the growth in the overall loan book of the nation’s eight commercial banks and one merchant bank. From that perspective, the ratio of past due loans to total loans was up “marginally to 2.96% at March 2024”, the central bank pointed out.

(Source: Caribbean National Weekly)

• Mexico’s fiscal deficit will widen from 3.4% of GDP in 2023 to about 5.3% this year, which would represent the weakest outturn since 1989, according to projections from Fitch Solutions.
• Data available to May have generally been consistent with the government’s revised estimates from March, with the deficit running roughly 10% below target on the back of a strong tax take (+10% y-o-y, +3% versus budget). Spending growth has been effectively in line with plan but remains robust at +22% y-o-y.
• While higher debt servicing costs are partially to blame, the bulk of this increase can be explained by a notable ramp-up in social spending and public investment ahead of general elections in June.
• There are expectations to see some moderation in expenditure growth over the second half of 2024 as several large infrastructure projects are completed, but the impact on the budget balance will be offset by softness in revenues as the economy slows.
• A pullback in spending will see the deficit narrow to 4.0% of GDP, but this would still represent an overshoot relative to the government’s target of 3.5%.
• Overall, wide budget deficits this year and next will see Mexico’s federal debt-to-GDP ratio rise from 46.8% in 2023 to 48.6% in 2024 and 49.4% in 2025, only marginally below a record high of 49.9% in 2020.

(Source: Fitch Solutions)

• Following the Central Bank of Trinidad and Tobago’s (CBTT) announcement of a reduction in reserve requirements for commercial banks to 10% from 14%, economist and former minister in the Ministry of Finance Mariano Browne said this could increase foreign exchange demands.
• The CBTT announced the reduction in a release on July 19 following a Monetary Policy Committee (MPC) meeting held the same day. The Committee noted that a lowering of the reserve requirement, accompanied by greater reliance on open market operations, would have an immediate impact on liquidity. These factors led to the reduction of the primary reserve requirement.
• "Since the effect of reducing the reserve requirement is potentially expansionary by increasing consumption, we can presume that the CBTT is attempting to expand demand and increase economic activity. The CBTT has stated that 2024 economic growth prospects were 'modestly' favourable. Perhaps this injection in disposable income is to help boost economic growth,' said Browne.
• However, Browne noted the real risk of expanding the economy is the risk of inflation and an increase in foreign exchange demand.
• 'This expansion is not likely to lead to moderate inflation. However, any expansion will increase the demand for foreign exchange, which is already in short supply. That is the real danger as foreign exchange reserves have continued to slide as energy import values and volumes have declined,' explained Browne. He added that this reduction suggests banks will have more money to lend.
• "Making more loans has a positive effect on consumer buying power. This means that banks can lend more and the loan funds are then spent or invested,' Browne said. He added that this reduction could also potentially increase consumption.

 (Sources: Trinidad Express Newspaper & CBTT)

• The Bank of England (BoE) will trim the Bank’s Rate to 5% next week, a majority of economists said in a Reuters poll, and with inflation expected to hover around target, it will embark on a slow and steady reduction path with one more cut this year.
• However, markets are only pricing in around a 45% chance of a cut and several economists declined to say whether the first cut would come in August or September.
• Bank Rate has been at a 16-year high of 5.25% since last August. The BoE was one of the first central banks to start raising borrowing costs after the COVID-19 pandemic and, like its peers, is now looking at easing the policy.
• In June, the rate-setting Monetary Policy Committee voted 7-2 to leave Bank Rate on hold, but some members said their thinking was now "finely balanced". An August cut would put the BoE ahead of the U.S. Federal Reserve, which is expected to wait until September, but behind the European Central Bank, which made its first cut in June and although it paused this month, it said September was "wide open".
• Following August's trim, the Bank will pause in September before cutting 25 basis points in November to put Bank Rate at 4.75%, median forecasts showed. It will take another breather in December. However, it will be a similar slow and steady pace next year with 25 basis point cuts in the first and second quarters, 50 in the third, and 25 in the fourth, to put Bank Rate at 3.50% by end-2025
• The path for growth will also be steady - the economy was predicted to expand 0.3% each quarter through to the end of 2025. Across this year, GDP growth will pick up 0.8% before an acceleration to 1.3% next year, a touch faster than expected in June.

(Source: Reuters)

• Growth in euro zone business activity has stalled this month as a tepid expansion in the bloc's dominant services industry failed to offset a deeper downturn among manufacturers, a survey showed on Wednesday.
• Hamburg Commercial Bank’s (HCOB) preliminary composite Purchasing Managers' Index, compiled by S&P Global, dropped to 50.1 this month from June's 50.9, barely above the 50-mark separating growth from contraction and defying expectations in a Reuters poll for an uptick to 51.1.
• "The euro zone's flash July PMIs corroborate the message sent by other leading indicators that the recovery is faltering. If leading indicators continue to underwhelm, this may result in a downgrade to our GDP growth forecasts," said Rory Fennessy at Oxford Economics.
• The bloc's economy will average 0.7% growth this year and 1.4% next, according to a Reuters poll earlier this month. The region's No. 1 economy, Germany, will expand a meagre 0.2% this year and 1.2% in 2025, the poll showed.
• Those German numbers could also be revised down as business activity there unexpectedly contracted this month, dragged down by a steep and dramatic fall in manufacturing output, its PMI indicated.
• Consequently, expectations about the coming year in the euro zone waned again, suggesting business managers do not expect an imminent turnaround. The composite future output index registered a six-month low of 60.0 compared to June's 60.8.
• Of note, the European Central Bank (ECB) is expected to cut its deposit rate twice this year, in September and December, according to a strong majority of economists in the Reuters poll.

 (Source: Reuters)

• Jamaica and the World Bank will collaborate over the next three to four years to implement programs and initiatives across ministries to develop and upskill the country’s human capital. The initiatives, which aim to accelerate Jamaica’s pace of development, will be carried out under the Jamaica-Country Partnership Framework (CPF) from 2024 to 2027.
• Speaking at a recent World Bank country partnership framework event at the AC Marriott in Kingston, Minister of Finance and the Public Service, Dr. the Hon. Nigel Clarke, noted that human capital development is a major pillar of the partnership framework, involving education, health and social protection..
• “Having resolved our macroeconomic issues… what is now essential is that we leverage that to improve people’s lives. We have to ensure that we improve the quality and quantity of the skills available in the Jamaican population to support higher levels of growth that can give the revenue that we require for further investment.” he said.
• Through the partnership, the Government will utilise the World Bank’s technical resources to produce policy improvements at an expedited pace to improve the quality of life and standard of living of Jamaicans.
• Dr. Clarke outlined that through the country partnership framework, the assistance to the Government will be twofold – on the public sector side, where the organisation will be helping with reforming policies, and on the private sector side to help mobilise private capital in structured transactions such as public-private partnerships (PPP) to deliver for the Jamaican people.
• The country partnership framework is a strategic development plan that marks the World Bank’s engagement in Jamaica with key targets and activities. The process begins with a systematic country diagnostic that looks at the challenges and opportunities for achieving the shared goal of reducing poverty and boosting shared prosperity.

 (Source: JIS)

• The Ministry of Agriculture, Fisheries and Mining has allocated $700mn as an immediate response to help farmers recover from the passage of Hurricane Beryl, which impacted the island on July 3.
• Portfolio Minister, Hon. Floyd Green, stated that the initial support funds will be allocated for the purchase of essential items that are urgently required to assist farmers in rebuilding their operations and conducting infrastructure repairs.
• The Minister added that the funds would be disbursed through the Rural Agricultural Development Authority (RADA), Jamaica Agricultural Society (JAS), Agro Investment Corporation (AIC) and Members of Parliament.
• “The allocation includes $210Mn, which will focus on crop recovery. We will allocate $90Mn to our vegetable lines, $40Mn towards our banana and plantain farmers, and $80Mn towards other crops, especially yam, and our coffee farmers,” Mr. Green said.
• “In relation to livestock, we are allocating $60Mn to help them [our small poultry farmers] rebuild their enterprise. We are not only allocating in relation to the provision of livestock; a number of farmers lost their infrastructure. As such, we are allocating $26Mn towards the rebuilding of livestock infrastructure,” he added.
• Mr. Green said an initial sum of $29Mn will be allocated to the fisheries sector, $30Mn will be allocated for fertiliser support, $55Mn for infrastructure support, $20Mn for irrigation, $50Mn for land preparation and clearance, and $70Mn for farm road rehabilitation. He noted that $150Mn will be allocated through Members of Parliament, which will be prorated based on the level of damage in the constituency.

(Source: JIS)