• Wage pressures are easing across the eurozone, driven in great part by lower additional compensation paid on top of negotiated wages, likely contributing to a further moderation of inflation, a European Central Bank study argued on Wednesday. Wage growth has been rapid for years, driven significantly by so-called "wage drift", or actual payments made to employees on top of negotiated wages.
• Wage drift has been driven by bonuses, inflation compensation payments and longer hours worked. However, the most recent data show a closing gap between negotiated and actual payments, a likely sign that inflation pressures will ease as the ECB has long predicted.
• "We are now at a point in the disinflation process where the upward pressure coming from wage drift is easing," the ECB said in an Economic Bulletin article. "The recent moderation of the growth in compensation per employee has been driven by an easing of wage drift."
• Instead, it will be negotiated wage growth that will once again become the main indicator for the ECB, but even there, signs of moderation are increasingly apparent. Negotiated wage growth slowed to 3.5% in the second quarter from 4.8% three months earlier, hitting its lowest level since late 2022. While this is still faster than the 3%, which is considered consistent with the ECB's 2% inflation target, the central bank hopes that a further slowdown will let price growth sink back to its target in late 2025.
• Germany, the euro zone's biggest economy, however, expects big wage increases well into 2025, raising some doubts about the ECB's outlook. "As inflation compensation is increasingly embedded in collective wage bargaining, high negotiated wage growth has been sustaining the current levels of growth in compensation per employee," the ECB said.
• "As inflation surge…there may be some residual real wage catch-up, but the upward pressure on negotiated wage growth is likely to subside," the ECB added.

(Source: Reuters)

• On Sept. 24, 2024, S&P Global Ratings revised its outlook on Jamaica to positive from stable. At the same time, it affirmed its 'BB-' long-term foreign and local currency sovereign credit ratings on Jamaica, its 'B' short-term foreign and local currency sovereign credit ratings, and its transfer and convertibility assessment of 'BB'.
• The positive outlook reflects the possibility of an upgrade if continued strengthening of the policy framework raises the likelihood of more sustainable public finances and balanced economic growth over the long term.
• Furthermore, S&P expects renewed GDP growth and improved budget balances in 2025 after temporary setbacks in 2024 due to Hurricane Beryl. It now expects a 1.5% contraction in the economy for 2024 versus its pre-hurricane expectation of 1.6% growth. As the country recovers, growth should resume, and by 2026 and 2027 should return to the trend of 1%-2% annually.
• Jamaica's net debt to GDP is falling and is now below 60% of GDP. The government's interest burden remains high but is also decreasing. As such, the interest burden is expected to fall modestly to 16.8% of government revenues in fiscal 2025 and to less than 15% by 2027.
• Additionally, in 2024, the Bank of Jamaica began reducing its policy rate, which stands at 6.75% as at August 2024. The Bank is expected to maintain cautious monetary policy, which combined with tight fiscal policy, will keep inflation within the target band over the next several years.
• With that said, external shocks are still a risk for Jamaica. To address the country's vulnerabilities to weather-related events, the government has created a disaster risk policy framework to build resiliency and respond faster in the aftermath of a disaster, which served Jamaica well at the onset of the pandemic. Although Jamaica has made progress on mitigating the fiscal risks, its economy and infrastructure remain vulnerable to physical risks.
• Overall, S&P believes Jamaica's institutions are strengthening, leading to improved public finances, more economic stability, and greater resilience to shocks, as demonstrated by the country's experience following a recent hurricane.

(Source: S&P Ratings)

• Prime Minister, Dr. the Most Hon. Andrew Holness, says the Government will be making significant long-term investments in improving Jamaica’s road infrastructure.
• “It is going to be a 20-year journey for us to get all our roads into the conditions where we can drive in comfort on all of them. Going forward, the Government is making the commitment, with the budgetary allocations from our [positive] economic performance, to build new roads, improve those roads, and maintain them. For the first time, we are in a position that we can project to be able to do this,” he disclosed.
• The Prime Minister was addressing a Diaspora town hall at the Lehman Center for the Performing Arts in New York on Saturday (September 21).
• Holness noted that Jamaica’s stable economic performance has been pivotal in facilitating investments in the island’s critical infrastructures. Key among these are developments slated to be carried out under the $40 billion Shared Prosperity Through Accelerated Improvement to our Road Network (SPARK) Programme.
• He highlighted that with stable revenues and a long-term projected investment path, business operators can feel confident in investments they make. He went on to state that the country’s improved economic structure is critical to facilitating these investments and emphasised the importance of the Diaspora’s role in growing the economy.

(Source: JIS)

• Costa Rica is set to undergo a transformative environmental and economic boost with the program “Ecosystem-based Adaptation to Increase Climate Resilience in the Central American Dry Corridor and Arid Zones of the Dominican Republic.”, a key initiative aimed at addressing the pressing challenges posed by climate change in the region.
• The Central American Bank for Economic Integration (CABEI) received a disbursement of US$7.2Mn from the Green Climate Fund (GCF) to begin implementing this program, which will benefit more than 2.4 million people in Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica, Panama, and the Dominican Republic.
• The disbursement of US$7.2Mn is the first installment of a larger GCF allocation to CABEI for this program, totalling US$174.3Mn. This funding will support a variety of activities in the region, including rainwater harvesting systems to help communities capture and store water during the rainy season for use in drier periods.
• The program will also introduce soil conservation techniques, such as contour ploughing and terracing, to prevent soil erosion and maintain fertility in the dry corridor. Additionally, it will promote diversified livelihoods like agroforestry and ecotourism, reducing dependence on agriculture and increasing income sources. Community agroforestry initiatives, including watershed tree planting, will enhance soil health, reduce erosion, and provide shade for crops, boosting resilience to climate change.
• The program seeks to improve the resilience of communities and ecosystems in this region by promoting ecosystem-based adaptation (EbA) measures for sustainable land and water management and livelihood diversification. It also aims to facilitate access to reimbursable resources (funds that need to be repaid) for the implementation of EbA and other measures to increase resilience to extreme weather events, such as severe droughts and heavy rainfall.

 (Source: The Tico Times)

• Mexico's annual inflation slowed more than expected in the first half of September, official data showed on Tuesday, September 24, paving the way for the country's central bank to deliver another interest rate cut at its next meeting.
• In Latin America's second-largest economy, 12-month headline inflation came in at 4.66% in early September, statistics agency INEGI (National Institute of Statistics and Geography) said, below both the previous month's 5.16% and the 4.73% forecast by economists polled by Reuters.
• The key figure remains above the Bank of Mexico's (Banxico) 3% target, plus or minus one percentage point, but will likely open the door for it to maintain a monetary easing cycle on Thursday when it is set to announce its next policy decision.
• Mexico's central bank last month lowered borrowing costs by 25 basis points to 10.75% in a divided vote. Market participants expect another 25-basis-point cut to 10.50%, according to a Reuters poll, as annual headline inflation has now slowed for four consecutive fortnights.
• "The fall in inflation, combined with the weakness of economic activity and the fact that the U.S. Fed is now easing monetary policy too, means that Banxico is all but certain to deliver another 25-basis-point cut," Capital Economics said.
• In the first half of September alone, INEGI data showed that Mexico's consumer prices increased by 0.09%, while economists in a Reuters poll projected a 0.15% rise. The lower-than-expected figure was related to a drop in food costs. Mexico's closely monitored core consumer price index, seen as a better gauge of price trends given that it strips out volatile energy and food prices, hit 0.21% in the period, with the annual rate at 3.95% - both in line with market forecasts.
• "Underlying inflation pressures are easing, and we expect inflation will continue to decline in the fourth quarter," Pantheon Macroeconomics said. "Moreover, falling expectations have enabled Banxico to implement interest rate cuts."

(Source: Reuters)

• U.S. consumer confidence dropped by the most in three years in September amid mounting fears over the labour market, though more households planned to buy a home over the next six months. The Conference Board survey on Tuesday also showed consumers expected inflation to increase in the coming year, clouding their views of the economy ahead of the Nov. 5 presidential election. The economy could determine the outcome of the vote.
• The Conference Board's consumer confidence index dropped to 98.7 this month from an upwardly revised 105.6 in August. The decline was the largest since August 2021. Economists polled by Reuters forecasted the index to rise to 104.0 from the previously reported 103.3.
• The biggest drop in confidence was among the 35 to 54 years age group. Confidence fell across most income groups, with consumers earning less than $50,000 a year experiencing the biggest decrease. The Conference Board said write-in responses about politics, including the November elections, remained below both 2020 and 2016 levels.
• The unemployment rate slipped in August after rising for four straight months. It has increased from 3.4% in April 2023 to 4.2% last month. The rise in the unemployment rate has been driven by an increase in labour supply, mostly from immigration. Layoffs remain at historically low levels.
• "The deterioration across the index's main components likely reflected consumers' concerns about the labour market and reactions to fewer hours, slower payroll increases, fewer job openings, even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages," said Dana Peterson, chief economist at the Conference Board.
• Consumers' 12-month inflation expectations increased to 5.2% from 5.0% in August, though more mentioned lower inflation in their write-in responses. "If inflation expectations continue to rise and the labor market continues to soften, the Fed is going to have a difficult time appropriately recalibrating monetary policy," said Conrad DeQuadros, a senior economic advisor at Brean Capital.

(Source: Reuters)

• The European Central Bank (ECB) is likely to continue to cut interest rates at least through the first half of 2025, to a level between 2% and 3%, Dutch ECB governing council member Klaas Knot said on Tuesday.
• "I would expect us to continue to gradually reduce interest rates in the coming time, also in the first half of 2025," Knot said. He further added, "I don't expect rates to return to the extremely low levels we saw before the pandemic. They will likely end up on a somewhat more natural level. I don't know where exactly, but somewhere starting with a 2."
• The ECB lowered its deposit rate by 25 basis points to 3.50% earlier this month, following up on a similar cut in June.

(Source: Reuters)

• Jamaica’s fiscal consolidation efforts are expected to face a temporary setback in 2025 due to rising public sector wages, which will push the country into a fiscal deficit says Fitch solutions. Although next year will deviate from the ongoing fiscal consolidation due to the anticipated deficit, Fitch notes that recent market developments still favour Jamaica.

• Jamaica’s fiscal is projected to improve from 0% of GDP in FY2023/24 to 0.2% in FY2024/25 (April 2024-March 2025), before flipping to a deficit of 0.7% in FY2025/26. The forecast of a deficit for FY2025/26 is due to rising public sector wages that exceed former caps, while tax increases are not expected during the election year to compensate for the rise.

• For FY2024/2025 government revenue is expected to increase from 31.7% of GDP to 35.3%. Fitch notes that the increase in tax revenues in FY2024/2025 will be supported by the May 2023 public sector salary bill, which will bring more public employees into higher tax brackets. It also noted that although the one-off sale of government receivables will help to cover the cost of the wage increase for FY2024, a more permanent increase in revenues will be required to fund it indefinitely.

• Jamaican authorities continue to make progress on reducing their debt burden, which declined from 78.1% of GDP at end-2023 to 74.7% by June 2024. Against this background, Fitch forecasts that central government debt levels will fall to 74.4% by end-2024 and anticipates that the government will remain mostly committed to its fiscally frugal approach in the coming years, which will see the debt-to-GDP ratio fall to 63.4% by FY2027/28.

• Risks to the forecast are mostly balanced. Fitch could see a wider fiscal surplus if the Jamaican economy grows faster than expected. That said, its core view is that a slowing US economy will cause the Jamaican economy to decelerate. On the downside, if economic activity were to slow further, or another natural disaster were to occur, it would expect tax revenue to slow, causing fewer revenues and a narrower fiscal surplus, or even a narrow fiscal deficit.

(Source: BMI Fitch Solutions)

• Effective November 11, 2024, Carreras Limited will be relocating its Corporate Office at 13A Ripon Road, Kingston and its Sales and Distribution Office at 35 Hagley Park Road, to a new Headquarters at 8 Automotive Parkway, Kingston 20.
• We anticipate that consolidating both offices into a single headquarters should allow Carreras to streamline its business processes and potentially reduce operating costs. The new location on Automotive Highway (off Ferry) offers convenient access to major toll roads (East-West & North – South), which would significantly enhance distribution efficiency. Carreras joins a series of manufacturers and distributors, including Tropical Battery, GraceKennedy, and Wisynco, who have made similar strategic relocations to optimize their logistics and reduce costs.
• CAR’s stock price has increased by 17.6% since the start of the calendar year. The stock closed Monday’s trading session at $9.70 and currently trades at a P/E of 13.2x, which is above the Main Market Manufacturing & Distribution Sector Average of 12.8x.

(Sources: JSE & NCBCM Research)

• The Dominican Republic has unveiled its budget for 2025, setting a new financial course for the nation. The Council of Ministers, led by President Luis Abinader, approved the draft General Budget Law for 2025, which allocates over 1.484 Trillion pesos (US$24.7Bn), according to Finance Minister Jochi Vicente.This figure represents the government’s plan for economic management in the coming year.
• The plan includes projected revenues that will amount to 1.233 trillion pesos, with a fiscal deficit of 3.1% of the Gross Domestic Product (GDP). This approach aims to support growth while maintaining financial stability.
• Of note, the 2025 budget is expected to be about 4% higher than the 2024 budget, reflecting an increase of approximately 65,000Mn pesos.
• Finance Minister José Manuel Vicente highlighted that the 2025 budget marks the first to incorporate the recently enacted Fiscal Responsibility Law. This law limits the growth of government spending to stabilize debt, aiming to reduce it to no more than 40% of GDP by 2025. He emphasized the bill’s focus on balancing public finances by capping spending growth.
• Social programs receive significant funding in the 2025 budget, with 54Bn pesos (US$901Mn) allocated. The government has also set aside 83Bn pesos (US$1.38Bn) for electricity subsidies and 10Bn pesos (US$167Mn) for fuel subsidies. 
• Infrastructure projects also feature prominently in the budget. The Santiago Monorail project will receive 24Bn pesos (US$400Mn) for completion, while the Santo Domingo Metro’s Line 2C is allocated 12.5Bn pesos (US$208Mn). These investments aim to improve urban transportation.

(Sources: The Rio Times & Dominician Today)