• In line with Fitch Solutions’ and consensus expectations, Colombia’s central bank, BanRep, decided to cut rates by 50bps to 11.25% at its latest June 28 meeting in a 4-to-2 vote (one absence). Further, Fitch anticipates that BanRep will cut by another 50bps in July.
• In the meeting announcement, the Board of Governors noted that 12-month inflation expectations continued their downward trajectory from 4.6% y-o-y in April to 4.3% in May, which bodes well for further cuts at the next meeting.
• Given this, Fitch is maintaining its forecast that the central bank will lower rates to 8.75% by the end of the year. However, the agency increased its end-of-year inflation forecast from 4.9% y-o-y to 5.2%, as the decline in price pressures begin to moderate in H2 2024.
• Risks to the interest rate outlook are skewed firmly to there being fewer cuts through 2024, implying higher rates in 2025, as more resilient growth could keep demand-side pressures elevated, resulting in hotter, above-target headline inflation for longer.

(Source: Fitch Solutions)

• Canada's services economy moved back into contraction in June as a decline in new business weighed on the sector's performance even as inflation pressures cooled, S&P Global Canada services PMI data showed on Thursday. The headline business activity index fell to 47.1 from 51.1 in May, its lowest level since March.
• A reading below 50 signals a deterioration in activity. The reading for May was the first time in a year that the index had been above the 50 threshold. "Following a return to growth in May, Canada's services economy slipped back into the moribund trend that has so characterized its performance in the post-pandemic period," Paul Smith, economics director at S&P Global Market Intelligence, said in a statement.
• "Activity and new business both fell at solid rates, amid reports of weak market demand." The new business index dropped below the 50.0 no-change mark for the first time in three months, falling to 47.9 from 51.8 in May, while the measure of outstanding business was at 45.1, its lowest level since December 2020, as firms comfortably managed their workloads.
• One bit of "good news" in the data was a slowdown in both input and output price inflation, which could contribute to the Bank of Canada's confidence that inflation pressures are contained, Smith said. Last month, the BoC became the first G7 central bank to begin cutting interest rates. The prices charged index fell to 50.9 last month from 55.4 in May and the measure of input prices was at 56.2, down from 60.0, marking its lowest level since February 2021.
• The S&P Global Canada Composite PMI Output Index, which captures manufacturing as well as service sector activity, also slipped back into contraction in June, falling to 47.5 from 50.6 in May. Data on Monday showed that Canada's manufacturing PMI was 49.3 last month, matching the level posted in May.

(Source: Reuters)

• With signs that the labour market is at least slowing, if not something worse, the June nonfarm payrolls report takes on added significance. Payroll gains so far in 2024 have totalled 1.24 million, down about 50,000 a month below the same period a year ago.
• In historical terms, the pace of job gains is still solid. However, there are signs bubbling underneath that conditions could be getting softer and possibly pointing at broader economic weakness down the road. “This is a report that’s coming at a point where there’s a little more uncertainty about the economic landscape than there has been in a few months,” said Nick Bunker, head of economic research at the Indeed Hiring Lab.
• The jobless level in May did nudge higher to 4%, the first time it hit that threshold since January 2022, up from 3.7% a year ago. The forecast is for the rate to hold there. Under normal circumstances, a 4% unemployment rate would be cause for celebration, not concern. However, what is catching the eye of some economists is where the rate is now compared with where it’s been over the past year.
• The May rate was 0.5 percentage points above its 12-month low of 3.5% in July 2023, potentially triggering a recession indicator called the Sahm Rule. The rule has shown consistently that whenever the unemployment rate on a three-month average eclipses its 12-month low by half a percentage point, the economy is in recession. While there are scant data signs that a recession is at hand, the trend in unemployment is generating some attention.
• There are also lingering inflation concerns that could keep the Fed on the sidelines for a while longer in terms of lowering interest rates. One other area of concern has been the divergence between the nonfarm payrolls count, as taken from establishments participating in the Bureau of Labor Statistics survey, against the household count of people reporting that they’re holding jobs.

(Source: Reuters)

• At its meetings on 26 and 27 June 2024, the Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC) unanimously agreed to start a gradual easing of its monetary policy stance. However, the MPC decided to maintain the policy rate at 7.0% per annum, at this time, and to continue its proactive stance of preserving relative stability in the foreign exchange market. This marks a little over a year since the policy rate was initially raised to 7.0%, and comes after four consecutive months of decline in the point-to-point inflation rate.
• Jamaica’s headline inflation at May 2024 was 5.2%, representing the third consecutive month in which inflation fell within the Bank’s target range of 4%-6%. This outturn was also significantly lower than the Bank’s most recent forecast and was largely due to some containment in domestic demand, a stable exchange rate, and a decline in imported inflation.
• Additionally, inflation expectations have stabilised, and anecdotal information suggests that wage pressures have moderated. The MPC also noted the surplus on the current account of the balance of payments for the December 2023 quarter, as well as the positive outlook for the balance of payments over the next year. This surplus underpins the relatively strong flows in the foreign exchange market and the relative stability in the exchange rate.
• In this context, projected inflation will likely be revised downward and generally remain within the target range over the next two years, except for a few months in 2025, primarily attributed to agricultural price inflation, following sharp declines in March 2024.
• The MPC has assessed that the risks to the inflation outlook are balanced (which means that inflation is likely to be in line with projections). The Committee will continue to monitor upside risks to inflation, which could influence higher inflation in the future. These risks include rising international shipping costs and the possibility of worse-than-anticipated weather conditions due to the emerging La Niña weather phenomenon.
• Future monetary policy decisions will continue to depend on incoming data, which, if they indicate a sustained anchoring of inflation within the target range, could lead to further easing of monetary policy. The date of the next policy decision announcement is 20 August 2024.

(Source: BOJ)

• During the first quarter of 2024, total value added at constant prices for the Jamaican economy grew by 1.4% when compared to Q1 2023, representing twelve consecutive quarters of growth. This growth was driven by an increase of 1.3% in the Services Industries and 1.9% in the Goods Producing Industries.
• Within the Goods Producing Industries, there were higher output levels in Agriculture, Forestry & Fishing (7.4%) and Mining & Quarrying (18.7%). However, there were declines in Manufacturing (0.8%), and Construction (3.7%).
• Improved performances were recorded for Hotels & Restaurants (6.9%), Transport, Storage & Communication (3.5%), Finance & Insurance Services (2.2%), Other Services (2.6%), Electricity & Water Supply (6.5%) and Real Estate, Renting & Business Activities (0.3%). However, the Services Industry’s outturn was tempered by a decline in Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment and Producers of Government Services, which was down by 2.2% and 0.5% respectively.
• When compared to the fourth quarter of 2023, the economy grew by 0.3%. This was due to growth in the Services and Goods Producing Industries of 0.1% and 0.8% respectively. The economy grew by 1.9% for the fiscal year 2023/2024 compared to the fiscal year 2022/2023.
• The 1.4% growth over the quarter was 0.5% lower than the Planning Institute of Jamaica’s (PIOJ) estimate of real value added of 1.9%. However, PIOJ noted that the performance of the local economy is expected to be generally positive for the April to June quarter, projecting that the economy should grow within the range of 1.5% to 2.5%.
• Growth during this period was largely driven by the continued strengthening of the Mining & Quarrying industry due to higher capacity utilisation at alumina refineries, increased domestic demand due to relatively high levels of employment, and continued strengthening in the global economy, which augurs well for external demand for Jamaica’s goods and services. The growth projection for FY2024/25 is within the range of 1.0% to 3.0%.

(Sources: STATIN and PIOJ)

• Despite an increase in inflation, amid generally stable global economic conditions, the Monetary Policy Committee of the Central Bank opted to maintain the repo rate at 3.50%.
• In the Monetary Policy Announcement for June 2024, the MPC said, “Domestically, the low level of inflation and buoyancy of credit were supportive of the ongoing economic recovery, although the negative interest rate differential warranted close monitoring given its potential impact on the country’s external balance.”
• In Trinidad and Tobago, the latest data from the Central Statistical Office (CSO) showed that headline inflation rose to 0.9% (year-on-year) in May 2024 from 0.5% one month earlier. With core inflation (which excludes food prices) unchanged at 0.3%, higher food prices were primarily responsible for the upward drift of inflation. Food inflation accelerated to 3.1% in May compared with 1.1% in April 2024 on account of price increases for several locally produced and imported food items. 
• Further, the MPC stated there are positive signs in terms of domestic economic recovery, “Production indicators monitored by the Central Bank during the fourth quarter of 2023 and into the first three months of 2024, such as local sales of cement and new motor vehicle sales, point to vibrancy in some non-energy sectors. Meanwhile, data from the Ministry of Energy and Energy Industries indicate that crude oil and natural gas outputs from the mature fields continued to slip over this period. “
• In terms of the financial sector, the MPC stated that the liquidity in the financial sector remained “ample” despite figures dropping slightly compared to last year.
• Finally, the report noted that interest rates on three-month treasuries in T&T continued to trend upwards, rising by 27 basis points (bps) since February 2024. That resulted in the differential between T&T and US three-month treasuries moving to -4.06% in May 2024 from 4.32% in February.

(Source: Central Bank of Trinidad and Tobago)

• The Bahamas, the first country in the world to issue a central bank digital currency (CBDC), is now preparing regulations that will require commercial banks to provide access to the e-money in a bid to stimulate adoption.
• The Bahamas' role as a CBDC pioneer (issued its "Sand Dollar" digital currency in 2020) means that what it does in the Caribbean is closely watched by the more than 130 countries, from Europe to China, that are now exploring digital versions of their currencies.
• John Rolle, the islands' central bank governor, who oversaw the Sand Dollar's launch nearly four years ago, said with take-up still limited, the carrot was turning into the stick and commercial banks were now being told of regulations that will effectively force them to distribute it.
• CBDCs have proven a point of contention between central and commercial banks, with banking lobby groups warning that the currencies could encourage deposit flight because they effectively offer the public a bank account at the central bank.
• Ordering banks to make the Sand Dollar available would require them to make significant changes to their information technology (IT) systems, but the Bahamas central bank sees it as vital to boost the CBDC's adoption and mobile payments more generally.

(Source: Reuters)

• U.S. manufacturing contracted for a third straight month in June as demand remained subdued, while a drop in a measure of prices paid by factories for inputs to a six-month low suggested that inflation could continue to subside. Manufacturing is being pressured by higher interest rates and softening demand for goods, though business investment has largely held up.
• The ISM's manufacturing PMI slipped to 48.5 last month from 48.7 in May. A PMI reading above 50 indicates growth in the manufacturing sector, which accounts for 10.3% of the economy. The PMI remains above the 42.5 level, which the ISM says over a period indicates an expansion of the overall economy.
• Economists polled by Reuters had forecast the PMI to climb to 49.1. It has indicated a contraction in manufacturing in 19 of the last 20 months. 62% of manufacturing gross domestic product contracted, up from 55% in May.
• The share of sector GDP registering a composite PMI at or below 45 — a good barometer of overall manufacturing weakness — jumped to 14% from 4% in the prior month. Eight manufacturing industries, including primary metals and chemical products, reported growth. Machinery, transportation equipment, electrical equipment, appliances and components as well as computer and electronic products were among the nine industries that contracted
• The ISM survey's forward-looking new orders sub-index rose to a still-subdued 49.3 reading from 45.4 in May. Output at factories decreased for the first time since February. The production sub-index fell to 48.5 from 50.2 in May.

• Manufacturing activity across the eurozone took a turn for the worse last month as demand fell faster despite factories cutting their prices, a survey showed.
• HCOB's final euro zone manufacturing Purchasing Managers' Index (PMI), compiled by S&P Global, fell to 45.8 in June from May's 47.3, just ahead of a 45.6 preliminary estimate. It has been below the 50-mark separating growth from contraction for two years.
• An index measuring output, which feeds into a composite PMI due on Wednesday and seen as a good gauge of economic health, sank from May's 49.3 to a six-month low of 46.1, albeit just ahead of the 46.0 flash estimate.

• "The PMI indices for all eurozone countries, except Italy, deteriorated in June. However, we are inclined to see this more as a temporary blip rather than a sign of a prolonged downturn," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
• "Manufacturing growth was seen in other parts of the world in June, such as the United States, Britain, and India, according to their respective flash PMI. This global recovery provides a supportive backdrop for eurozone manufacturers." The new orders index dropped to 44.4 from 47.3. That drop came despite factories cutting prices charged for a fourteenth month, although less steeply than in previous months.
• "It's rather depressing that forward-looking new orders are falling at an accelerated pace," de la Rubia added. "This decline comes after a record stretch of 25 consecutive months of falling demand, but a vague hope that things were improving in May when the respective index showed some increase."

(Source: Reuters)

• Output prices in the Mining and Quarrying industry rose by 0.5% in May 2024. In contrast, the manufacturing industry's prices stayed relatively stable according to new data from the Statistical Institute of Jamaica (STATIN).
• The movement in the Mining & Quarrying industry was attributed to a similar 0.5% increase in the index for the major group ‘Bauxite Mining & Alumina Processing’.
• For the Manufacturing industry, there was a decline of 0.8% in the index for the major group ‘Refined Petroleum Products’, while there was a 0.1% increase for the heaviest-weighted major group, ‘Food, Beverages & Tobacco’.
• Against the backdrop of May’s outturn, the point-to-point index (May 2023 – May 2024) for the Mining & Quarrying industry declined by 2.4%. This reflected a 2.6% fall in the index for the major group ‘Bauxite Mining & Alumina Processing’. In contrast, driven by the major groups ‘Refined Petroleum Products’ (13.0%) and ‘Food, Beverages & Tobacco’ (1.2%), the point-to-point index for the Manufacturing industry increased by 3.0%.
• Geopolitical tensions in Europe and the Middle East pose risks that could disrupt the oil prices and the supply chain, resulting in higher producer costs. However, as businesses transition to renewables globally, there could be lower oil demand. Additionally, the increase in global oil production, led by the US and other American countries, may lead to a fall in prices. Moreover, OPEC+ has signalled plans to gradually unwind voluntary cuts earlier than anticipated, thus sparking concerns about whether the market can absorb those additional barrels heading into 2025.
•  Mining and Quarrying Prices have been trending down and could be further influenced by fluctuations in the exchange rate as well as greater demand for aluminium.
• 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 industries being tracked are Manufacturing Industry and Mining and Quarrying.

 (Source: STATIN, NCBCM Research)