• The Bank of Mexico's governing board may consider larger cuts to its benchmark interest rate going forward as inflation in Latin America's second-largest economy cools, bank governor Victoria Rodriguez told Reuters on Monday, September 30.
• Banxico, Mexico’s central bank, lowered its key rate by 25 basis points (bps) to 10.50% last Thursday, the second consecutive cut as price pressures ease. Banxico previously cut rates by 25 bps in March.
• Banxico will announce its next monetary policy decisions on November 14 and December 19. However, the latest rate cut approved by Banxico's five-member governing board was not unanimous. Deputy Governor Jonathan Heath voted to hold the rate at 10.75%.
• Mexico's annual headline inflation slowed to 4.66% in the first half of September, official data showed, its fourth consecutive fortnight of decline. Core inflation also moderated to 3.95%, its lowest level since early 2021.
• "The adjustment to the inflationary outlook indicates to us that it's appropriate to reduce the level of restrictive monetary policy, though we also recognize we continue to face challenges," said Rodriguez. "The inflation outlook has been improving significantly. Last week, Banxico revised its forecast for annual headline inflation in the fourth quarter slightly downward to 4.3%, from 4.4% previously, while also adjusting its expectations for core inflation to 3.8% from 3.9%.

(Source: Reuters)

• On September 30, 2024, the Honourable Colm Imbert, Trinidad and Tobago’s (T&T’s) Minister of Finance, delivered his tenth National Budget presentation under the theme “Steadfast and Resolute: Forging Pathways to Prosperity”.
• T&T’s projected deficit of TTD5.52Bn continues to be a concern given the still heavy reliance on its energy sector. However, the T&T economy grew by 1.3% in 2023 and 1.9% in 2024. These are promising signs despite a contraction of the energy sector and geopolitical tension, which directly impact local and international trade.
• With revenue projected at TTD54.224Bn and expenditures at TTD59.74Bn, the budget deficit will be TTD5.52Bn based on an oil price assumption of US$77.80 per barrel, a natural gas price assumption of US$3.59 per MMBtu and anticipated oil revenue of TTD14.17Bn.
• Some takeaways from the budget presentation include investments in Health (TTD7.57Bn), followed by education (TTD7.51Bn) and national security (TTD6.11Bn). Additionally, the minimum wage for public sector employees is set to be increased by 9.8% from TTD20.50 to TTD22.50, following a 17.0% increase in January 2024.
• The budget contemplates the phased rollout of property taxes after the suspension of the Land and Building Tax Regime in 2010 and the granting of a Tax and National Insurance (NIS) Amnesty, allowing taxpayers to regularise outstanding tax obligations and ensure compliance. Other takeaways from the budget include plans to issue interest-bearing VAT bonds to alleviate the significant backlog of VAT refunds owed to businesses, and tax-exempting electric vehicle charging equipment and sporting equipment.
• Given the paucity of its proven energy reserves, T&T needs to diversify the economy away from the energy sector. The Minister highlighted diversifying initiatives like expanding trade agreement networks and granting further incentives to propel the agricultural, tourism, manufacturing and other sectors.
• That said, the government continues to rely heavily on the energy sector, despite acknowledging the need to insulate T&T from the volatility of energy sector revenue contributions.
• Overall, the Government is faced with the unenviable task of maintaining economic stability by focusing on, among other things, infrastructural development, security and diversification, while addressing current vulnerabilities.

(Source: PWC)

• Tens of thousands of dockworkers have gone on strike indefinitely at ports across much of the US, threatening significant trade and economic disruption ahead of the presidential election and the busy holiday shopping season. Members of the International Longshoremen's Association (ILA) walked out on Tuesday at 14 major ports along the East and Gulf coasts, halting container traffic from Maine to Texas.
• President Joe Biden has the power to suspend the strike for 80 days for further negotiations, but the White House has said he is not planning to act. The White House said that President Biden and Vice President Kamala Harris were monitoring the strike closely. "The President has directed his team to convey his message directly to both sides that they need to be at the table and negotiating in good faith - fairly and quickly."
• Union boss Harold Daggett has called for significant pay increases for his members, while voicing concerns about threats from automation. He has indicated the union wants to see per-hour pay increase by five dollars per year over the life of the six-year deal, which he estimated amounted to about 10% per year.
• Time-sensitive imports, such as food, are likely to be among the goods first impacted. The ports involved handle about 14% of agricultural exports shipped by sea and more than half of imports, including a significant share of trade in bananas and chocolate, according to the Farm Bureau. Other sectors exposed to disruption include tin, tobacco and nicotine, Oxford Economics said. Clothing and footwear firms, and European carmakers, which route many of their shipments through the Port of Baltimore, will also take a hit.
• More than a third of exports and imports could be affected by the strike, hitting US economic growth to the tune of at least $4.5bn each week of the strike, according to Grace Zemmer, an associate US economist at Oxford Economics, though others have estimated the economic hit could be higher. She said more than 100,000 people could find themselves temporarily out of work as the impact of the stoppage spreads.

(Source: BBC)

• U.S. job openings unexpectedly increased in August after two straight monthly decreases, but hiring was soft and consistent with a slowing labour market. Job openings, a measure of labour demand, rebounded by 329,000 to 8.040Mn by the last day of August, the Labour Department's Bureau of Labour Statistics said in its Job Openings and Labour Turnover Survey, or JOLTS report, on Tuesday.
• Data for July was revised higher to show 7.71Mn unfilled positions instead of the previously reported 7.67Mn. Economists polled by Reuters had forecast 7.66Mn job openings. Hires slipped by 99,000 to 5.317Mn. Layoffs declined by 105,000 to 1.608Mn.
• The Federal Reserve last month cut its benchmark interest rate by an unusually large 50 basis points (bps) to the 4.75%-5.00% range, the first reduction in borrowing costs since 2020, in a nod to rising concerns over the labour market's health.
• Fed Chair Jerome Powell said at a National Association for Business Economics conference on Monday that "labour market conditions have clearly cooled over the past year," but added, "this is not a (Federal Open Market) committee that feels like it is in a hurry to cut rates quickly." The Fed is expected to cut interest rates again in November and December. The focus now shifts to the employment report for September which is due to be released on Friday.
• Nonfarm payrolls likely increased by 140,000 jobs last month after rising by 142,000 in August. That would be well below the average monthly gain of 202,000 jobs over the past 12 months. The unemployment rate is forecast to be unchanged at 4.2%. It has risen from 3.4% in April 2023 as a surge in immigration boosted labour supply.

(Source: Reuters)

• At its meetings on September 26 and 27 2024, Tha Bank of Jamaica’s (BOJ’s) Monetary Policy Committee (MPC) unanimously agreed to further reduce the policy rate by 25 basis points (bps) to 6.50%, effective Wednesday, 01 October 2024. This will be the BOJ’s second consecutive rate cut in as many months.
• The reduction in the policy rate comes mere days after the US Fed cut its policy rate by 50bps and is timely given the sharp slowdown in economic activity in Q2 to 0.1% from 1.4% in Q1 and the negative impacts of Hurricane Beryl, especially on the agricultural sector.
• Despite a rise in consumer prices in  August 2024, stemming from the impact of Hurricane Beryl, the BOJ expects that headline inflation will return to its target range earlier than initially forecasted.
• The BOJ’s outlook largely reflects the possibility of a lower-than-anticipated impact of Hurricane Beryl on agricultural supplies.
• Furthermore, the measure of core inflation that excludes the prices of agricultural food products and fuel was 4.3% in August 2024, continuing the decline in underlying inflation since the start of 2024. Core inflation was 5.9% in January 2024, 9.7% in January 2023 and 7.1% in January 2022.
• The MPC now anticipates a temporary uptick in headline inflation over the next 2 to 3 months in the context of the current active hurricane season, which ends in November.
• The MPC's decision was influenced by the anticipated impact of Hurricane Beryl on the Jamaican economy and the delayed effects of monetary policy on spending. However, the BOJ forecasts that real economic activity for FY2024/25 will be more favourable than previously expected, thanks to a less severe estimate of Hurricane Beryl's effect. Still, the MPC believes that future interest rate adjustments will be gradual and depend on incoming data.
• Over the past two years, many local sectors have faced challenges due to high interest rates. It is anticipated that these gradual reductions will enhance economic activity, which may subsequently facilitate a rebound in the stock market. However, this effect is likely to be delayed, as it generally requires approximately 18 months for changes in interest rates to fully work through the economy.

 (Source: BOJ, NCBCM Research)

• The agricultural sector, which suffered significant damage during the passage of Hurricane Beryl, is on the road to recovery owing to decisive action by the Government of Jamaica (GOJ) and the resilience of farmers and fisherfolk.
• This was noted by Minister of Agriculture, Fisheries and Mining, Hon. Floyd Green, as he provided an update on the Hurricane Beryl Recovery Programme in the House of Representatives on September 24.
• Mr. Green said that, to date, almost $900Mn has been allocated through the Rural Agricultural Development Authority (RADA) to execute the Hurricane Beryl Recovery Programme.
• “I am pleased that the Government was able to allocate an additional $1.4 billion towards the Hurricane Beryl Recovery Programme,” he pointed out. The Minister said the funds have been directed towards providing seeds, fertilisers, livestock, infrastructure rehabilitation, and technical assistance to farmers and other critical activities.
• Mr. Green reported that assessments reveal that 14,370 farmers across the parishes of St. Elizabeth, Manchester, Clarendon, St. Catherine, Westmoreland, Trelawny, and St. Ann have directly benefited from this program through RADA. This initiative not only supports farmers in their recovery but also strengthens the agricultural community as a whole, fostering resilience and sustainability in the face of future challenges.
• Although the sector is on the path to recovery, adverse weather conditions associated with the hurricane season continue to pose a risk that could disrupt this progress. Minister Floyd Green has indicated that over 100 farmers have been affected by the recent heavy rainfall across Jamaica.

(Source: JIS &NCBCM Research)

• Following the decision in July to reduce the reserve requirement of commercial banks in Trinidad and Tobago (T&T) from 14.0% to 10.0%, T&T banking system liquidity rose by about TTD$3Bn, according to the latest Monetary Policy Announcement by the Central Bank of Trinidad and Tobago (CBTT).
• On July 24, 2024, the Monetary Policy Committee (MPC) of the CBTT reduced the primary reserve requirement for commercial banks from 14.0% to 10.0%. The MPC stated at the time of the announcement, that daily excess reserves for July had fallen by 29% compared to June. And the June figure was lower than the excess reserves for May.
• The Central Bank also noted that growth in financial system credit to the private sector has been relatively strong in recent months. Consumer lending grew by over 10% (year-on-year) between March and June 2024, with a concentration on motor vehicle loans, refinancing and debt consolidation. Meanwhile, business and real estate mortgage lending rose by a monthly average of 9.2% and 5.1% respectively between March to June 2024.
• Finally, the Central Bank stated that the continued rise in domestic interest rates on treasury bills amid the sustained public sector financing requirements and decline in external interest rates led to a narrowing of the (negative) TT/US short-term interest differential. The differential moved from -349 basis points to -271 basis points between June and mid-September 2024.

(Source: CariCris)

• The Dominican Republic’s (Dom Rep) economy grew 5.6% in August, with growth  averaging 5.1% between January and August of this year.
• Overall growth between January and August 2024 was due to the performance of activities in construction (4.9%) and free trade zone manufacturing (6.6%). Likewise, service activities as a whole showed an accumulated increase of 5.4% relative to the previous corresponding period, seeing stand-out growth in hotels, bars and restaurants (7.1%), transportation and storage (5.9%), real estate and rental activities (5.8%) and communications (5.3%).
• The Central Bank explained that given its previous monetary and fiscal policies, the economy grew in an environment of price stability as inflation remained at the lower end of the 4.0% ± 1.0% range.
• Furthermore, the Central Bank also highlighted that, among its Latin American peers, Dom Rep had the fastest economic expansion between January and August according to the latest published information available.

(Source: Dominican Today)

• Buying a house may remain out of reach for many Canadians for the foreseeable future, with mortgage costs unlikely to fall enough to offset lofty home prices and weak spending power, economists and real estate agents say. Even with expectations that the Bank of Canada (BOC) will keep cutting rates in the coming months, the issue of home affordability - which has strangled Prime Minister Justin Trudeau's poll numbers - is unlikely to fade before the next election.
• Many Canadians have been priced out of the housing market since interest rates started rising two years ago. At the same time, a huge influx of immigrants has pushed Canada's population to record levels, further boosting housing demand and prices.
• For "the majority of potential buyers who are on the sidelines, if it means $50 or even $100 less a month thanks to lower interest rates, it's still unaffordable," said Robert Hogue, assistant chief economist at the Royal Bank of Canada. In the most expensive markets of Toronto and Vancouver, many potential buyers are still priced out, he said. Some of them should be able to buy a house next year, but not enough to restore balance.
• Housing affordability is a function of house prices, interest rates and a borrower's income. Those metrics have skewed unfavorably for prospective buyers since the start of the pandemic. Canadian house prices on average have increased by more than 30% since April 2020, while interest rates soared by 4.75 basis points until they started coming down in June.
• Calculations based on average house prices from the Canadian Real Estate Association show that monthly interest payments on a five-year fixed-rate mortgage are still 40% higher than in January 2020, even after a drop in mortgage costs from last year's highs.
• During the same period, real or inflation-adjusted household income has risen by 2.3%, while nominal income has increased by 21%, according to estimates from Statistics Canada. For affordability to return to pre-pandemic levels, house prices would need to come down by at least 10% and mortgage interest costs would have to drop by half from current levels.

(Source: Reuters)

• More stocks are participating in the S&P 500’s latest march to record highs, easing concerns over a rally that has been concentrated in a handful of giant technology names for much of 2024.
• The S&P 500 is on track to gain 5.0% in the third quarter, which ends on Monday. This time, however, optimism that the Federal Reserve’s rate cuts will boost U.S. growth is pushing investors into shares of regional banks, industrial companies and other beneficiaries of a strong economy and lower rates, in addition to the tech-focused stocks that have already seen massive gains this year.
• More than 60.0% of S&P 500 components have outperformed the index so far this quarter, compared to around 25.0% in the first half of the year. At the same time, the equal-weight version of the S&P 500 -- a proxy for the average index stock -- has gained 9% in the quarter, outperforming the S&P 500, which is more influenced by the heavily weighted shares of megacaps such as Nvidia and Apple.
• Various corners of the stock market are benefiting from expectations of lower rates and steady growth. The S&P 500’s industrial and financials sectors - seen by investors as among the most economically sensitive areas - are up 10.6% and about 10%, respectively, in the third quarter. Falling rates are also a boon to shares of smaller companies, which disproportionately struggle with elevated borrowing costs.

(Source: Reuters)