• The European Central Bank cut interest rates again on Thursday as inflation slows and economic growth in the eurozone falters but gave few clues to its next step, even as investors bet on steady policy easing in the months ahead.
• The ECB lowered its deposit rate by 25 basis points to 3.50%, following up on a similar cut in June as inflation is now within striking distance of its 2% target, and the domestic economy is skirting a recession.
• The move had been widely telegraphed, and investor attention has already shifted to what comes next and how ECB decisions will be shaped by the U.S. Federal Reserve's expected start to its own rate cuts next week; however, the ECB gave little away.
• "Our path, of which the direction is pretty obvious - a declining path - is not predetermined, neither in terms of sequence nor in terms of volume," ECB President Christine Lagarde told a press conference. She instead repeated the bank's standard formula for a "data-dependent", meeting-by-meeting approach to policy with no pre-commitments.
• With just five weeks until the next policy meeting, they said there may be little new data to support an October cut. Lagarde painted a mixed picture of inflation in the eurozone continuing to be sustained by rising wages even as overall labour cost pressures moderated and were absorbed by companies.
• She said services sector inflation remained a major worry but that wage growth is moderating, and corporate profits are absorbing rapid wage increases. Lagarde warned that negotiated wage growth will remain high and volatile this year in light of some high profile pay deals struck recently.

(Source: Reuters)

• The number of Americans filing new applications for unemployment benefits increased marginally last week, pointing to a still-low level of layoffs even as the labour market slows.
• Initial claims for state unemployment benefits rose 2,000 to a seasonally adjusted 230,000 for the week ended Sept. 7, the Labor Department said on Thursday. Economists polled by Reuters had forecast 230,000 claims for the latest week.
• Last week's data included the Labour Day holiday, and claims tend to be volatile around public holidays. They have, however, been little changed since dropping from an 11-month high of 250,000 in late July. The slowdown in the labor market is being driven by businesses scaling back on hiring as higher interest rates curb demand throughout the economy.
• Against the backdrop of labour market slowdown, the Federal Reserve is expected to start its policy easing cycle next Wednesday, with a 25-basis points rate cut guaranteed after the annual increase in consumer prices slowed considerably in August, though some stickiness in inflation remained.
• The number of people receiving benefits after an initial week of aid, a proxy for hiring, increased 5,000 to a seasonally adjusted 1.850 million during the week ending Aug. 31, the claims report showed. The so-called continuing claims have mostly trended lower through August after surging in July to levels last seen in late 2021. The decline is consistent with the drop in the unemployment rate last month.

(Source: Reuters)

• Knutsford Express Services Limited (KEX) delivered a strong revenue performance for the fiscal year ending May 31, 2024; however, rising costs weigh on net profit growth.
• KEX saw a record-breaking 18.9% (or $312.38Mn), increase in revenue, reaching JMD $1.96Bn, up from JMD $1.65Bn in the previous year, making it the highest reveneus ever recorded by the company. This surge was driven by continued demand for its passenger and courier services, as well as additional contributions from rental income at its Drax Hall Business Centre and café operations. The company reported higher passenger volumes across all routes.
• However, this growth did not translate into a substantial increase in earnings as the company recorded only a modest 1.7% increase in net profit for its financial year ended May 31, 2024 ($309.46Mn from $304.36Mn in the prior year). This marginal increase is largely attributed to rising administrative expenses.
• Administrative expenses increased by 24.9% to $1.66Bn, largely due to workforce expansion to support growing customer demand. The sharp increase in expenses outpaced revenue growth, leading to a marginal 3.5% (or $14.13Mn) rise in operating profit. The operating margin, as a result, dipped by 3.22 percentage points to 21.52%.
• The company’s growth trajectory is promising, but profit margins will remain under pressure unless management can control rising expenses. To address this, management has been implementing cost containment strategies to curb rising expenses and support profitability.
• However, with plans of expanding its fleet with new coaches and deploying kiosks in its depots to provide a seamless digital experience in the booking and check-in phases of travel for its customers, careful cost management will be crucial. If these investments can enhance operational efficiency, profitability could improve over the medium term. However, short-term profitability is likely to remain constrained unless there are deliberate efforts to yield more immediate results.
• KEX’s stock price has fallen 14.0% since the start of the calendar year, to $10.87 at the close of Wednesday’s trading session. It currently trades at a P/E of 14.9x, which is below the Junior Market Other Sector Average of 15.8x.

(Sources: JSE & NCBCM Research)

• iCreate Limited has announced its planned transition to Kintyre Holdings (Ja) Limited and its appointment of Dr. Nick Rowles-Davies to its Board of Directors, effective September 9, 2024. The restructuring of iCreate to Kintyre Holdings (JA) Limited represents a strategic shift for the company as it aims to transform from a digital and creative training company to a diversified investment holding company.
• Rowles-Davies brings over 20 years of leadership experience in legal finance and investment management. As part of this transition, he will serve as Chairman of the Corporate Governance Committee and Chairman of the Investment Committee.
• iCreate’s reorganisation comes following significant compliance challenges, which resulted in two suspensions from the Jamaica Stock Exchange (JSE) over the past year. The most recent suspension was lifted on June 19, 2024, after the company addressed outstanding issues, including the submission of financial statements and appointment of a board mentor.
• It is anticipated that the new Committee Chairman will help shape the company’s investment strategy while enhancing corporate governance, transparency, and ethical business practices as the company attempts to revamp its business model.
• iCreate’s stock price is down 17.3% since the start of the calendar year. It closed at $0.43 at the end of Wednesday’s trading session. At this price, iCreate trades at a P/E of 11.0x, which is below the Junior Market “Others” sector average of 15.8x.

(Sources: JSE & NCBCM Research)

• Panama´s port operators had, for the first time in three years, increased container volume by 18.5% in the period January-July. According to statistics released by the Panama Maritime Authority (AMP), all terminals showed double-digit growth during the seven months, with an average of 18.5% and a combined volume of 5.59 million TEU, Seatrade Maritime reported.
• On the Atlantic side, Colon Container Terminal (CCT) and Port of Cristobal volumes grew by 22.3% and 30.5%, respectively.  Meanwhile, PSA Panama International Terminal (PPIT) and Port of Balboa, on the Pacific Side, posted an increase in volume of 26% and 14.7%, respectively. SSA Marine’s MIT terminal also saw a growth of 10.5%.
• A key factor driving this growth has been the strategic expansion of operations to accommodate the increased volume diverted from the Canal due to draught restrictions. Congestion in other transshipment hubs in the Caribbean, along with the ongoing Red Sea crisis, which led to the diversion of commercial routes, has also worked positively towards the increment of transshipment volume into Panama.
• According to the general manager of SSA Marine’s MIT, Manuel Pinzon, on the supply side, the Panama Canal’s reduction in transit numbers and allowable vessel draughts, due to a lack of rainfall in the Canal watershed, created an opportunity for ocean carriers to exploit Panama’s land bridge more effectively. The ability to connect containers via rail or truck between the Atlantic and Pacific oceans increased container volumes handled by container terminals in Panama, as global supply chains continue to seek efficient routes to navigate trade uncertainties and logistical challenges.
• On the demand side, the global economic recovery post-pandemic has significantly driven up container throughput. Imports to Latin America have risen by nearly 10%, while exports from the region have increased by over 7%.
• As international trade volumes surged with the revival of global markets, ocean carriers have increasingly relied on Panama’s ports to expedite their services between major economic centres which has therefore led to increased container volume for the sovereign.

 (Source: Seatrade Maritime News)

• The Bahamas’ national debt fell by more than $200Mn during the three months to the end of June 2024 as total repayments exceeded new borrowings by the Government. The Central Bank, unveiling its economic review for the second quarter of 2024, added that the country’s debt only increased by “a muted” $3.6Mn over the last 12 months to close the fiscal year at a total of $11.653Bn.
• The modest increase, combined with economic growth, also took The Bahamas’ debt-to-GDP ratio to a fraction below 80%. As a ratio to GDP, the direct charge decreased by an estimated 2.7 percentage points on a yearly basis to 77.6% at the end of June. In addition, the national debt-to-GDP ratio declined to an estimated 79.9% compared to 83% in the second quarter of 2023.
• In terms of overall fiscal operations, provisional data on the Government’s budgetary operations for the first ten months of FY2023/24 (July 1, 2023, to June 30, 2024) showed that the overall deficit declined by $68.8Mn (27.9%) to $177.9Mn, relative to the previous corresponding period in FY2022/23.
• The outturn reflects a $195.9Mn (8.3%) expansion in total revenue to $2,550.9Mn on account of higher value-added tax (VAT) collections and higher proceeds from stamp taxes on financial and realty transactions, which outpaced the $127.1Mn (4.9%) growth in aggregate expenditure to $2,728.8Mn.
• Going forward, the fiscal deficit is projected to fall to $69.8Mn for FY2024/25, relative to FY2023/24 budgeted $131.1Mn. This represented an estimated lower budgeted deficit to GDP ratio of 0.5% for FY2024/25 from the planned 0.9% of GDP for FY2023/24. Correspondingly, the National Debt to GDP ratio is forecasted to be lower at 75.3% for FY2024/25 from the budgeted 80.6% for FY2023/24.

(Sources: Central Bank of the Bahamas & The Tribune)

• U.S. consumer prices rose slightly in August, but underlying inflation showed some stickiness amid higher costs for housing and other services, further dashing hopes of a half-point interest rate cut from the Federal Reserve next week.
• The mixed inflation report from the Labour Department on Wednesday followed data last week showing the labour market still cooling in an orderly fashion in August, defying fears of a sharp deterioration, with the unemployment rate retreating from the near three-year high touched in July.
• As a result, financial markets boosted the chances of a quarter-point rate cut next Wednesday and sharply lowered the probability of a 50 basis point reduction.
• The consumer price index increased 0.2% last month after rising by a similar margin in July, the Labor Department's Bureau of Labor Statistics said. The rise in the CPI was in line with economists' expectations.
• Food prices edged up 0.1% after climbing 0.2% in each of the past two months. Grocery store food prices were unchanged as increases in the costs of meats, fish, eggs and dairy products were offset by decreases in the prices of non-alcoholic beverages, fruits and vegetables.
• In the 12 months through August, the CPI advanced 2.5%. That was the smallest year-on-year rise since February 2021 and followed a 2.9% increase in July. Prices increased at a 1.1% annualized rate in the past three months, indicating that a disinflationary trend was now firmly entrenched, allowing policymakers to focus more on the labor market in their quest to sustain the economic expansion.

(Source: Reuters)

• The U.K. economy continued to flatline in July on a month-on-month basis, flash figures published from the Office for National Statistics showed Wednesday. Gross domestic product (GDP) also came in below the expectations of economists polled by Reuters, who had forecast growth of 0.2%. The country also logged no GDP growth in June.
• Britain’s dominant services sector showed slight growth of 0.1% in the month to July, while production and construction output fell by 0.8% and 0.4%, respectively. Britain’s economic growth was up 0.5% in the three months to July, slightly below economist expectations and the 0.6% recorded in the second quarter ending in June.
• “The economy recorded no growth for the second month running, though longer term strength in the services sector meant there was growth over the last three months as a whole,” Liz McKeown, director of economic statistics at the ONS, said. The U.K. economy has recorded modest but steady expansion almost every month so far this year, having emerged from a shallow recession at the start of the year.
• Lindsay James, investment strategist at Quilter Investors, said the prospect of tax raises could add further caution to consumer spending over the coming months.
• “Tax rises have been flagged ahead of the Autumn Budget, and consumers and businesses may feel rather more cautious heading into the winter months as they await details from the Treasury,” she said. She added that further movement in interest rates anticipated from the Bank of England could help ease wider growth pressures. The central bank is set to meet next week for its latest policy decision after cutting rates for the first time in four years last month.

(Source: Reuters)

• Jamaican growth appears to be slowing in 2024, undershooting prior downbeat projections of 2.4% (previously 2.6%), which raises some downside risk to social stability and, in turn, the popularity of the ruling Jamaica Labour Party (JLP) ahead of next year’s general elections, according to Fitch Solutions.
• Data from the Planning Institute of Jamaica (PIOJ) suggests that growth may have slowed to just 0.1% y-o-y in Q2 2024, following a real GDP growth of 1.4% in Q1 2024. Additionally, the PIOJ’s Q2 report found that July air arrivals were down 7.7% y-o-y, which indicates a slowdown in the tourism sector. The sector accounted for 29% of employment in Jamaica before the pandemic, according to the World Travel and Tourism Council. Against that background, Q3 2024 is unlikely to have brought much relief, given the onset of Hurricane Beryl in July.
• Crime will likely be a central topic in the 2025 elections, given Jamaica's high regional violent crime rate, notes Fitch Solutions. However, data from Jamaica's Constabulary Force indicates that from January 1 to August 31, murders have decreased by 15.8% y-o-y and shootings by 3.0%. Still, a slowdown in economic activity in the coming months may reverse these positive trends.
• Crime levels have been mostly consistent and may even be declining, but are still quite high relative to the rest of Latin America and the Caribbean, which also slightly increases social stability risks.
• Fitch notes that economic activity is likely to slow further than its previous expectations, influenced by the slowing US economy. Given the strong economic ties between Jamaica and the US, Fitch expects that this development could hinder JLP’s campaign in 2025. It went on to highlight that a moderating Jamaican economy can lead to higher crime rate, especially as unemployment increases (5.4% as at January 2024).

(Source: BMI Fitch Solutions)

• Minister of Science, Energy, Telecommunications, and Transport, Honourable Daryl Vaz, has announced that significant reductions in electricity bills are expected for the September billing cycle.
• This follows productive discussions held on September 9^th with the President of the Jamaica Public Service Company Limited (JPS), where it was confirmed that the necessary adjustments are being implemented in accordance with the Office of Utilities Regulation’s (OUR) directives.
• Minister Vaz expressed optimism about the upcoming changes, stating, “After discussions with the President of JPS this morning, he advised me that work began, today, for the September bill cycle. He confirmed that significant reductions should be seen, aligning with the OUR’s instructions and the government’s advocacy. I am hopeful that this month’s results will bring much greater satisfaction to our citizens compared to the previous month.”
• The anticipated reduction in electricity bills reflects the government’s ongoing commitment to address public concerns regarding energy costs, particularly since the passage of Hurricane Beryl in July this year. As the September billing cycle progresses, the government will continue to monitor the situation closely and ensure that JPS adheres to the prescribed adjustments.

(Source: JIS)