• Germany's economy is expected to contract by 0.2% in 2024, the economy ministry said on Wednesday, which is likely to make it for the second year running the only member of the Group of Seven major industrial democracies to post shrinking output.
• The government is cutting its forecast from a previous projection of 0.3% growth for this year, as the expected recovery in the second half of the year failed to materialise. Germany's economy was already the weakest among its large euro zone peers and other G7 countries last year, with a 0.3% decline in gross domestic product.
• The economy contracted in the second quarter, sparking fears of a possible recession, defined as two consecutive quarters of contraction. Early indicators such as industrial production and business climate suggest that the economic downturn has continued into the second half of the year, the ministry said.
• The economy has not grown strongly since 2018 due to its structural problems and geopolitical challenges, Habeck said. The strength of the German economic model was based on two pillars: cheap energy for industry from Russia and functioning global markets for its exports, the economy minister said.
• To counter the cyclical and structural challenges, it has agreed to a growth package of 49 measures. "If they are implemented, the economy will be stronger and more people will come back to work," Habeck said.
• Growth is expected to resume in 2025 due mainly to increased private consumption resulting from higher wages, falling inflation and tax relief, the ministry said. Lower interest rates should also stimulate consumption, it said. However, construction investments will not contribute to growth again until 2026, the ministry said.

(Source: Reuters)

• The Statistical Institute of Jamaica (STATIN) Labour Force Survey (LFS) revealed that in April 2024, the unemployment rate was 4.2%. There were 62,800 unemployed persons; females accounted for 58.1% of those unemployed. There were 29,400 unemployed youth (aged 15 -24) in April 2024, of which 15,100 or 51.4% were males.
• STATIN noted that the changes made to the LFS represent a break in the series, and as such, data comparability with previous quarters is not advised. However, for context, the unemployment rate reported for January 2024 was 5.4%.
• STATIN revised its survey to incorporate the latest international standards and guidelines from the International Labour Organization (ILO), which resulted in a significant change in the definition of employment and unemployment. Additionally, the reference week for the LFS has shifted from the last full week of the previous quarter to the first full week of the current quarter and the minimum age for inclusion in the LFS has been raised to 15, which is consistent with the ILO recommendations (previously 14 years old).
• Overall, the labour force comprised 1,483,100 persons, including 788,500 males (53.2%) and 694,600 females (46.8%), with an overall labour force participation rate of 63.3%.
• Of this, 1,420,300 members of the labour force were employed, with 762,200 males (53.7%) and 658,100 females (46.3%). Among the employed population, 24,800 or 1.7% were underemployed (time-related), meaning they worked part-time but wanted additional hours.
• The occupation group with the highest number of employees was ‘Services and Sales Workers’, employing 324,800 individuals, representing 22.9% of the total employed population. The second largest was ‘Elementary Occupations’, employing 192,900 individuals, followed by ‘Skilled Agricultural, Forestry and Fishery Workers’ which employed 187,800 persons. Regarding industry groups, ‘Wholesale and Retail Trade; Repair of Motor Vehicles and Motorcycles’ was the largest employer, engaging 265,100 individuals or (18.7%).
• Of note, there were 93,900 youth who were not employed, not enrolled in educational activities or currently in training (NEET), of which 48,700 were males and 45,100 females.
• Given the sharp slowdown in Jamaica's economy in the second quarter ( 0.2% from 1.9%) in Q1 2024, and the projected contraction of -0.1% to -1.0% in Q3 due to the impact of Hurricane Beryl, unemployment levels could inch up in subsequent surveys. Of note, recent layoffs by a major BPO company could cause the rate to rise, especially if other operators follow suit.
• The Labour Force Survey is expected to resume its regular quarterly schedule following the delay in the January 2024 report, likely due to the survey’s revisions.

(Source: STATIN)

• The Caribbean Community (CARICOM) and the African Union (AU) have signed a Memorandum of Understanding (MoU) to enhance effective cooperation and collaboration between the organisations and their peoples.
• Signed in the margins of the recently concluded 79th Session of the United Nations General Assembly in New York, the MoU envisages the creation of a conducive environment for investment on the African continent and in CARICOM.
• In addition to promoting investments, the MoU seeks to deepen relations by creating platforms for closer people-to-people interaction and solidarity through initiatives including a diaspora volunteer exchange as a framework for associating people with development. The MoU also outlines modalities for cooperation and collaboration, information sharing, as well as its implementation.
• The MoU was signed by the CARICOM Secretary-General, Dr Carla Barnett, and the Deputy Chairperson (DCP) of the African Union (AU) Commission, Dr Monique Nsanzabaganwa, on behalf of the African Union. (CARICOM).

(Source: CARICOM)

• The official opening of Barbuda’s new international airport marks a significant milestone for the island’s economic development.
• The Barbuda International Airport, soon to be renamed the Burton-Nibbs International Airport, is expected to bring numerous benefits to the sister island of Antigua and Barbuda. Prime Minister Gaston Browne, in his remarks during the ceremony, emphasised that the airport will catalyze growth and development.
• “This in essence will actually open up Barbuda. It’s going to be the catalyst for growth and development to attract more tourists and investments, increased trade, and an enormous amount of opportunities, including career opportunities for Barbudan people,” he said.
• The 6,100-foot runway can accommodate larger aircraft, including private jets and planes as large as the Embraer E170 which typically seats around 72 passengers, opening up possibilities for direct flights from North America and Europe soon.
• Prime Minister Browne also emphasised his vision for Barbuda’s development, stating that the island would soon have access to many of the amenities currently available in Antigua.
• Looking ahead, Barbuda is anticipated to see other developments including the repurposing of $35Mn in funding to build out concrete road infrastructure, with construction expected to begin in 2025. Educational opportunities are also set to be enhanced with the establishment of a branch of the Antigua and Barbuda Institute of Continuing Education (ABICE) on the island.

(Source: Antigua Observer)

• The U.S. trade deficit narrowed sharply in August as exports increased to a record high, suggesting trade could have little or no impact on economic growth in the third quarter. The smaller-than-expected trade gap reported by the Commerce Department on Tuesday added to data on the labour market and consumer spending in suggesting that the economy remained on solid footing last quarter.
• The economy's strength likely has no impact on expectations that the Federal Reserve will cut interest rates again next month. It, however, reinforced views that the U.S. central bank did not need to pursue another half-percentage point rate reduction. Economists at Goldman Sachs maintained their forecast for gross domestic product to rise at a 3.2% annualised rate in the July-September quarter after the trade data.
• "This report says that net trade supports GDP growth in August," said Carl Weinberg, chief economist at High Frequency Economics. "Putting together July and August figures suggests that net trade is flat so far in third quarter, making no significant addition or subtraction to GDP growth so far." Trade has subtracted from gross domestic product for two straight quarters.
• The trade gap contracted 10.8% to $70.4 billion, the smallest in five months, from a revised $78.9 billion in July, the Commerce Department's Bureau of Economic Analysis said.
• Economists polled by Reuters had forecast the trade deficit would narrow to $70.6 billion from the previously reported $78.8 billion in July. Exports increased 2.0% to a record $271.8 billion. Goods exports surged 2.5% to $179.4 billion, the highest level since September 2022. They were boosted by a $1.7 billion rise in capital goods to a record high, mostly reflecting telecommunications equipment, civilian aircraft, computer accessories as well as other industrial machinery.

(Source: Reuters)

• Several European Central Bank policymakers argued their case on Wednesday for another interest rate cut next week, even if some of their colleagues remained unconvinced as turmoil in the Middle East fuels volatility in energy costs.
• The ECB has already lowered rates twice this year, and a cut to a 3.5% deposit rate on Oct. 17 is almost fully priced in by financial markets, indicating investors expect the bank to accelerate the pace of policy easing given a weak economy and an unexpectedly quick slowdown in price growth.
• "A cut is very likely, and it will not be the last one, the rhythm depending on how the fight against inflation evolves," French central bank chief Francois Villeroy de Galhau told Franceinfo radio station. That message is fully in line with expectations as more than 90.0% of economists polled by Reuters anticipate a cut next week with a similar majority betting on a follow-up move in December.
• "Even if we have one cut of 25 basis points now and another one in December, we will be back to just 3.0% — still in highly restrictive territory," Greek central bank chief Yannis Stournaras told the Financial Times in his support for back-to-back moves.
• The issue is that the economy has been stagnating for most of the past year, the labour market is softening, wage growth is slowing, and inflation has fallen quicker than the ECB predicted. However, Belgium's Pierre Wunsch was still undecided, arguing that there were opposing forces at play as growth is weak but domestic inflation is still too quick and geopolitical tensions have pushed energy costs higher.
• Financial investors now see the ECB's deposit rate falling to 3.0% by the end of the year and 2.0% by the end of 2025, hitting what a large part of the financial community considers the neutral rate, a level that neither stimulates nor slows economic growth.

(Source: Reuters)

• With the Bank of Jamaica’s (BOJ’s) next meeting scheduled for November 21, Fitch Solutions anticipates two additional 25 basis points (bps) rate cuts in November and December, bringing the rate down to 6.0% by year end.
• This is based on the observation that GDP is slowing and is projected to contract in Q3 2024. Additionally, core inflation is easing, and recent spikes in headline inflation are likely to be temporary. Supply-side issues, such as hurricanes damaging farmers' yields, are not expected to result in a long-term rise in inflation, especially as international commodity prices are declining. Furthermore, the Fed's reduction of its policy rate alleviates external constraints on the BOJ.
• Fitch Solutions also revised its year-end interest rate forecast to 6.0%. After the November meeting, the BOJ’s Monetary Policy Committee will convene one last time in December, where another 25bps cut is anticipated. Inflation is expected to resume its downward trajectory in Q4 2024, ending the year at 5.7% year-on-year, driven by weaker demand and the diminishing effects of the recent spike in annual food price growth.
• Furthermore, Fitch forecasts that the policy rate will be lowered to 4.50% by year-end 2025, as the global easing cycle, led by the Fed, continues and the BOJ gains more room to stimulate the economy.
• This scenario is premised on a reduction in the Fed’s funds rate to 3.00% by mid-2025. Fitch’s observation is that the BOJ tends to respond to the Fed's cuts, exemplified by the 25 basis point reduction after the Fed's 50 basis point cut on September 18^th. Following softer growth in 2024 (BMI forecast: 0.5%), the BOJ is likely to aim for growth stimulation in 2025 through lower rates (BMI forecast: 2.3%). However, a persistently negative output gap may limit the immediate effects on inflation, which is expected to remain relatively contained in 2025, averaging around 4.0%, close to the lower end of the BOJ's tolerance band.

• Risks to this forecast suggest a lower end-of-year interest rate if another extreme weather event impacts Jamaica. Furthermore, the country remains susceptible to external factors, and Jamaica's hurricane season extends through November.

(Source: Fitch Solutions)

• The Jamaican economy grew by just 0.2% during the second quarter of 2024 (Q2 2024) compared to Q2 2023, according to STATIN. This was slightly higher than the preliminary figures of the Planning Institute of Jamaica (PIOJ), 0.1%, but still significantly slower than the growth of 1.4% recorded in Q1 2024.
• This slowdown occurred amid a 2% decline in the Services Industries - the first decline since Q1 2021 - which dampened the 1.5% rise in the Goods Producing Industries.
• The decline in the Services Industries was largely due to contractions in Wholesale & Retail Trade, Repairs, Installation of Machinery & Equipment (WRTRIM); Producers of Government Services; and Real Estate, Renting & Business Activities, which fell by 0.5%, 1.9%, and 1.5%, respectively. However, growth was seen in Hotels & Restaurants (1.0%), Finance & Insurance Services (2.4%), Transport, Storage & Communication (0.7%), Electricity & Water Supply (2.3%), and Other Services (0.1%).
• Growth among the Goods Producing Industries was driven by Agriculture, Forestry & Fishing, Mining & Quarrying, and Manufacturing, which grew by 3.4%, 4.0%, and 1.8%, respectively. Favourable weather conditions and ongoing government support to boost crop production aided the growth in the Agriculture, Forestry & Fishing sector. Growth in Mining & Quarrying was largely driven by a surge in alumina output, which rose by 15.0% to 385.2 thousand tonnes in 2024, up from 334.9 thousand tonnes in 2023, in response to increasing global demand. Meanwhile, the Manufacturing sector experienced a 1.8% growth, fueled primarily by a 4.1% increase in the Food, Beverages & Tobacco sub-industry.
• However, a reduction in activities in the building construction and civil engineering sector weighed down output in the Construction industry, which declined by 1.9%.
• Looking ahead to Q3 2024, the PIOJ projects that Jamaica's economy contracted by -0.1% to -1.0% relative to Q3 2023, largely due to the impacts of Hurricane Beryl. As a result, the short-term outlook for the overall economy appears negative, with anticipated contractions in the Agriculture, Mining & Quarrying, Electricity & Water, and Hotels & Restaurants sectors.
• However, there remains a chance that the impact of Hurricane Beryl could be less severe than expected. Forward-looking estimates from the Bank of Jamaica (BOJ) suggest that real economic activity for FY2024/25 will be more favourable than expected, thanks to a less severe damage estimate attributed to Hurricane Beryl. Jamaica’s economic recovery post-Beryl is expected to be led by growth in the agriculture, tourism and construction sectors with support from the GOJ and other key stakeholders.
• Starting Q4 2024, Agriculture sector recovery will likely be fueled by the GOJ’s financial support to farmers, allowing for rapid replanting and a faster recovery in production levels. For the tourism sector, with the US Fed signalling its economy is still resilient, a more favourable July 2024 Travel Advisory from the US Embassy, and efforts from the GOJ and other stakeholders to improve the Tourism Product, Jamaica’s Tourism sector is likely to rebound as the winter tourist season approaches. For the construction sector, amid the significant infrastructure damage, major post-hurricane repairs in the public and private sectors will likely ramp up expenditures for rebuilding, driving construction activity and economic growth.
• Nonetheless, resurgent inflation could prompt the BOJ to pause rate cuts, while a continued slowdown in tourism, an extended economic contraction from Beryl or another violent storm hitting Jamaica before the end of the 2024 hurricane season could all weaken economic growth prospects.

 (Source: STATIN & NCBCM Research)

• Fitch Solutions forecasts that Trinidad & Tobago’s (T&T) current account surplus will narrow from 12.1% of GDP in 2023 to 5.6% and 6.7% in 2024 and 2025, respectively.
• In recent years, T&T has benefitted from a surge in global energy prices, especially following Russia’s invasion of Ukraine in February 2022. In 2022, surging energy prices helped the current account surplus to jump to 17.5% of GDP, the highest since 2013.
• However, the surplus has narrowed considerably in recent quarters, in line with the normalisation of global energy prices. Despite rising tensions in the Middle East, Brent crude oil prices have trended down, with Fitch’s Oil & Gas team revising its average forecasts for 2024 and 2025 to USD81/bbl¹ and USD78/bbl (from USD85/bbl and USD82/bbl previously). Given these dynamics, Fitch has revised its current account projections, forecasting narrower surpluses in the coming years, although still wider than the 2015-2019 average of 4.2% of GDP.
• Going forward, falling energy prices will constrain export receipts, while robust household spending and an uptick in fixed investment will buoy demand for imported consumer and capital goods.
• Despite the narrowing surplus, Fitch foresees limited risks to Trinidad & Tobago’s external sector, with import coverage remaining well above the IMF’s minimum recommended threshold of 3.0 months.

________________

¹ In the oil industry, bbl refers to a barrel of crude oil or 42 gallons.

(Source: Fitch Solutions)

• Mexican President Claudia Sheinbaum, who took office this week as her country's first woman leader, announced a package of reforms on Thursday, October 3, aimed at bolstering women's rights in a country with some of the world's highest levels of gender violence.
• On her second full day in office, Sheinbaum said her government had proposed reforms to articulate and broaden women's rights, including a constitutional guarantee of equal pay for equal work.
• In Mexico, women make 65 pesos for every 100 pesos a man earns, according to the Mexican Institute for Competitiveness think tank, citing data from the national statistics agency.
• The reforms also seek to guarantee freedom from violence and to require gender parity in government cabinets at the state and federal levels. The plan involves modifying six articles of the Constitution and seven secondary laws, changes that will likely be approved in both houses of Congress, where the governing party, Morena, and its allies enjoy large majorities.
• Sheinbaum, the former mayor of Mexico City and a protege of former President Andres Manuel Lopez Obrador, took office on Tuesday and vowed that it was "time for women." On Thursday, the president said the proposed reforms were part of an effort to ensure women knew their rights and could identify gender-based discrimination. Toward that end, her government promised to create a type of women's bill of rights.
• Mexico has made recent strides in the representation of women in government and public positions, not only with Sheinbaum's election but also by installing the first woman to lead the country's Supreme Court, the first female governor of the central bank, and gender parity in Congress.

(Source: Reuters)