• Resilient economic activity, fiscal slippage and rising inflation expectations will see the Banco Central do Brasil (BCB- Brazil Central Bank) begin a modest tightening cycle over what is left of the second half of 2024 (H2 2024).
• Growth came in well above trend at 1.4% q-o-q (3.3% y-o-y) in Q2 2024. What made this print more impressive is that it followed a strong Q1 2024 growth figure of +1.0% q-o-q and came despite severe flooding that disrupted the harvest season in the south of the country in May
• According to Fitch Solutions, the economic strength is partially a reflection of rate cuts pushed through over H2 2023 and H1 2024 and still reasonably supportive fiscal policy, which have helped to underpin domestic demand.
• In terms of fiscal policy, the Lula administration’s budget proposals for 2025 (Fiscal tightening, with the primary deficit set to narrow modestly from 0.6% of GDP in 2024 to 0.4% per Fitch’s forecasts) suggest that it will again fail to comply with the fiscal framework that was unveiled in 2023, with revenue likely to disappoint relative to plan and little effort being made to rein in spending.
• The upshot of these developments is that Fitch now believes that the BCB will perform a policy U-turn in the coming weeks, with a mini hiking cycle that Fitch suspects will begin on September 18. It is expected that the Central Bank will raise the Selic rate from 10.50% to 11.50% by year-end, reversing roughly a third of the cuts implemented over the prior year.
• Going forward, space exists for the BCB to revert to loosening mode over 2025, as tighter monetary policy works to slow domestic demand and, in turn, inflation. However, incoming President Gabriel Galípolo is likely to move cautiously to build up his credibility with investors, who are wary of his ties to Lula.

(Source: Fitch Solutions)

• The new international airport in Barbuda is set to open in less than a month. The government of Antigua and Barbuda has announced that it has received the green light from the Eastern Caribbean Civil Aviation Authority (ECCAA) to commence commercial flights.
• The Cabinet shared that the Chairman and new CEO of the Antigua Barbuda Airport Authority (ABBA), Wendy Francette-Williams, gave them the positive news on September 4, 2024. They were informed that the old airport in Barbuda will close at sunset on October 2, 2024, and the new airport will officially open at sunrise on October 3, 2024.
• The new airport has undergone significant upgrades, with the government investing over US$14Mn. Enhancements include the construction of a 7,100-foot runway and ongoing training for fire service personnel, airport staff, and other key personnel.
• Antigua and Barbuda is poised to emerge as a beacon for high-end tourism in the Caribbean, and the completion of the Barbuda Airport holds substantial opportunities for the island’s tourism industry.
• Overall, the economy is poised to be a leader in tourism in the region, and this by extension will encourage greater foreign direct investment, particularly through construction initiatives. Furthermore, tourism growth will feed directly into domestic economic growth through increased domestic demand driven by higher private consumption.

(Sources: Caribbean Loop News & NCBCM Research)

• China's exports grew at their fastest pace in nearly 1 1/2 years in August, suggesting manufacturers are rushing out orders ahead of tariffs expected from a growing number of trade partners, while imports disappointed amid weak domestic demand.
• The mixed trade data highlights the challenge facing Beijing as policymakers try to bolster overall growth without becoming too reliant on exports, especially given the tightening of consumers' purse strings.
• Outbound shipments from the world's second-largest economy grew 8.7% year-on-year in value last month, the quickest since March 2023, customs data showed on Tuesday, beating a forecast 6.5% increase in a Reuters poll of economists and a 7% rise in July. On the other hand, imports increased by just 0.5%, missing expectations for a 2% boost and down from the 7.2% growth a month prior.
• Economists have warned that Beijing risks undershooting its growth target if it becomes too reliant on exports, following a series of lacklustre data, raising pressure on policymakers for more stimulus to revive China's economy. "The continued strong run of exports may actually delay near-term policy support, and we continue to expect bolder measures to be released in Q4," Nomura analysts said in a note.
• Outbound shipments to the European Union grew 13.4% in August year-on-year, which represented the biggest increase out of China's major export markets, followed by an 8.8% lift in sales to the Southeast Asian economies. Chinese exports to the U.S. rose by just an annual 4.9% last month but imports grew 12.2% over the same period, the most of any major import market.

(Source: Reuters)

• U.S. inflation-adjusted household income increased, but poverty rates showed only modest changes last year, the U.S. Census Bureau reported on Tuesday, offering a mixed snapshot of how American households fared as the economy returned to pre-coronavirus pandemic growth levels.
• Real median household income rose to $80,610 in 2023, up 4.0% from 2022, back to the peak reached in 2019, while earnings for workers were higher than before the pandemic, a boost to households after multiple years in which workers' wages were outpaced by high inflation.
• The report also showed a main gauge of the nation's poverty rate, adjusted for government support such as food assistance and tax credits as well as household expenses, rose to 12.9% from 12.4% in 2022. The so-called official poverty rate declined to 11.1% from 11.5%.
• The Census noted, however, that the adjustments to income levels used to determine whether a person lived in poverty were larger for the supplemental measure than for the official measure in 2023. Had the official threshold increase been applied for the supplemental rate, that rate would have declined to 12.0% from 12.4% the prior year. In 2023, the threshold for the official rate increased by 4.1% to $30,900 for a two-adult, two-child household.
• The supplemental child poverty rate, also adjusted and referring to those under the age of 18, rose to 13.7% in 2023 from 12.4% the previous year. The rise in the supplemental child poverty rates was impacted by the end of extra pandemic-related government benefits. For example, extra pandemic-related food assistance programs ended in March of last year in a majority of U.S. states, and school meal aid also narrowed.
• The income and poverty data for 2023 comes two months before the U.S. presidential election. The shadow cast by a surge in inflation following the onset of the pandemic in early 2020, and how much that has squeezed pocketbooks of voters once government support programs designed to shore up household incomes expired, remains a key issue.

(Source: Reuters)

• Indies Pharma created history by becoming the very first Jamaican Company to receive the U.S. Food and Drug Administration (USFDA) approvals for an ANDA (generic drug). The USFDA approved Indies’ abbreviated new drug application on the 22nd day of August 2024. The USFDA determined that the company’s “Regadenoson” is bioequivalent and therapeutically equivalent to Astellas Pharma U.S., Inc.'s Lexiscan® (Regadenoson Injection).
• Regadenoson injection is a pharmacologic stress agent indicated for radionuclide myocardial perfusion imaging (MPI) in patients unable to undergo adequate exercise stress.
• This drug approval will allow Indies to enter the US market of approximately US$400 Million. With an aim to commercialize this product in the United States by or before the end of 2024, the company has initiated the process of entering distribution arrangements with a few drug distributors in the United States.
• This was one of the company’s most anticipated drug approvals, which was originally scheduled for November 2024. However, it has been approved earlier than expected. A portion of the company’s bond funds, its growth capital, was used to develop this drug to gain entry into the US market.
• According to IQVIA, US sales of Regadenoson Injection, 0.4mg/5mL, were approximately US$668 Million per annum in the 12 months ending February 2023. With the approvals being granted for the generic versions, the dollar value for this particular drug in the United States is bound to decline, and it is speculated to fall to under US$400 Million per annum.
• The integration of these drugs into the US market is expected to support strong business growth and serve as a major earnings driver. Additionally, the company is also actively researching to identify new generic drugs to introduce into the US market.
• Indies’ stock price has decreased by 4.8% since the start of the calendar year. The stock closed Monday’s trading session at $2.76 and currently trades at a P/E of 14.4x, which is below the Junior Market Heath Sector Average of 16.0x.

(Sources: JSE and NCBCM Research)

• According to the Bank of Jamaica (BOJ), Jamaica’s Net International Reserves (NIR) stood at US$5,004.89Mn at the end of August 2024, reflecting a 1.2% (US$62.90Mn) reduction relative to July 2024 (US$5,067.79Mn). This marginal fall-off in the NIR can be attributed to a 1.2% (or US$61.84Mn) decline in total foreign assets along with a slight increase of US$1.06Mn in Foreign Liabilities.
• The dip in foreign assets reflects a fall in Currency and Deposits to US$3,412.48Mn from US$3,474.46Mn, and Special Drawings Rights (-46.6% or $18.58Mn). However, this was moderated by increases in Securities (+1.1%) and the IMF Reserve Position balance (+1.4%).
• The lower NIR came against the background of six interventions by the BOJ in the foreign exchange market during the month totaling US$180Mn.
• Still, the country’s NIR remains relatively high. The NIR for August translated to 25.3 weeks of goods & services imports (25.8 weeks at the end of July 2024). Compared to August 2023, the NIR increased by 14% (or $612.78Mn), up from $4,392.11Mn (24.0 weeks of imports). That said, at the current level, Jamaica’s NIR is more than double the international benchmark of 12-weeks of imports. 
• Maintaining an adequate level of reserves is one of the key pillars of underwriting and ensuring macroeconomic stability. This is important given that the country is small and vulnerable to a myriad of shocks due to its dependence on other economies, highlighted by the balance of payment deficit.
• The NIR reflects the difference between gross reserves and the country’s IMF loan debts. Gross reserves measure the total value of foreign exchange and monetary gold reserves, special drawing rights, IMF reserve positions, and other assets denominated in dollars.

(Sources: BOJ and NCBCM Research)

• Minister within the Ministry of Public Works for Guyana, Deodat Indar, said that the massive growth and development taking place across Guyana and investments in infrastructure have led to increased property prices in areas that many persons would have never thought of. Indar made this pronouncement while delivering the feature address at the Connect Real Estate Mega Summit hosted by Keller Williams Guyana at the Guyana Marriott Hotel in Georgetown.
• During his address, the minister emphasised the role of infrastructural development and growing industries in reshaping the current real estate market. However, he said that to get ahead of this, the government enacted the Real Estate Act in 2023, which was a crucial step in regularising the sector.
• The Act’s main aim was to protect real estate agents, ensuring they were fairly compensated for their efforts in facilitating property transactions, among other things. “So, when a country is moving at the pace of Guyana, the laws of the country need to be updated to deal with the new realities,” he said. He underscored that the new Act mandates payment for agents who help buyers and sellers complete transactions, thus formalising the sector and adding greater transparency.
• Giving an example, he indicated that the booming oil and gas sector has reshaped the country’s real estate landscape along the Demerara River. “If you had to find an inch of property there, well, good luck to you,” Minister Indar posited, noting that prime riverfront properties have become exceedingly scarce.
• This scarcity, along with infrastructural projects such as shore bases and roads, has led to a rise in property values and areas that were once undeveloped are now in high demand, with infrastructure dramatically improving the quality of and desirability for these areas. Additionally, he indicated that the demand for housing is also growing rapidly as new developments attract more workers and businesses.
• Further, he encouraged those in the real estate sector to familiarise themselves with the Real Estate Act, ensuring that they are well-positioned to capitalise on the opportunities being created by the country’s rapid development.

(Source: Guyana Chronicle)

• Mexico's headline inflation rate likely eased in August after accelerating for the previous five months, a Reuters poll of analysts showed, boosting expectations that the Bank of Mexico will cut the benchmark interest rate later this month.
• The median estimate from eight analysts forecast an annual headline inflation rate in August of 5.08%, down from July's level of 5.57%, but still far from the central bank's target of 3.00%, plus or minus a percentage point. The closely watched core inflation index, which excludes products with high volatility to better gauge price trends, is seen falling for the 19th straight month to 4.02%.
• In August alone, consumer prices were estimated to have increased by 0.09% compared to the previous month, with core prices up 0.24%, according to the Reuters poll.
• Annual headline inflation in Latin America's second-largest economy had surged in recent months to a one-year high in July, even as core inflation eased, complicating the central bank's effort to bring down borrowing costs.
• The bank's board cut its benchmark interest rate by 25 basis points in early August in a divided vote, with two of the bank's five governors expressing concern that lowering the rate prematurely could impact the bank's credibility. The Bank of Mexico's next monetary policy decision will be announced on September 26, 2024.

(Source: Reuters)

• The U.S. economy created slightly fewer jobs than expected in August, reflecting a slowing labour market while also clearing the way for the Federal Reserve to lower interest rates later this month.
• Nonfarm payrolls expanded by 142,000 during the month, up from 89,000 in July, but below the 161,000-consensus forecast from Dow Jones, according to a report Friday from the Labour Department’s Bureau of Labour Statistics. At the same time, the unemployment rate ticked down to 4.2%, as expected.
• The labour force expanded by 120,000 for the month, helping push the jobless level down by 0.1 percentage point, though the labour force participation rate held at 62.7%. An alternative measure that includes discouraged workers and those holding part-time jobs for economic reasons edged up to 7.9%, its highest reading since October 2021.
• The household survey, which is used to calculate the unemployment rate and is often more volatile than the survey of establishments, showed employment growth of 168,000. The balance, though, tilted toward part-time employment, which increased by 527,000, while full-time fell by 438,000.
• From a sector standpoint, construction led with 34,000 additional jobs. Other substantial gainers included health care, with 31,000, and social assistance, which saw growth of 13,000. Manufacturing lost 24,000 in the month.
• Markets showed little initial reaction to the data, with stock futures holding negative and Treasury yields also lower. However, stocks sold off later in the session. While the August numbers were close to expectations, the previous two months saw substantial downward revisions. The BLS cut July’s total by 25,000, while June fell to 118,000, a downward revision of 61,000.
• The recent narrative for the economic data has indicated continuing growth but a slowdown for the labour market. Payrolls processing firm ADP reported Thursday that private companies added just 99,000 jobs in August, while outplacement firm Challenger, Gray & Christmas reported that layoffs surged in August and hiring had hit its slowest year-to-date pace going back to at least 2005.

(Source: CNBC)

• The U.S. public's outlook for inflationary pressures changed little last month amid an ongoing retreat in current price pressures, according to a report released on Monday by the New York Federal Reserve.
• In its latest Survey of Consumer Expectations, the regional Fed bank found that in August, respondents saw inflation a year and five years from now at 3% and 2.8%, respectively, unchanged from July. Three years from now, survey respondents expected inflation to be 2.5%, from 2.3% in July. The report also found that the expected change in house prices rose to 3.1% in August from 3% in the prior month.
• With price pressures steadily retreating and risks rising in the job market, the Fed is almost certain next week to cut its benchmark overnight interest rate from the current 5.25%-5.50% range. After the release on Friday of soft hiring data for August, markets are split as to whether the U.S. central bank will cut its policy rate by one quarter or one half of a percentage point, although most traders and investors believe a series of rate cuts will follow.
• Although overall expectations for inflation were mostly steady in August, the New York Fed report found the public expected higher price rises for gas, rent, and medical care, and slower gains in those for food and college.
• The report said respondents viewed the outlook for the labor market as mixed, with expectations of higher income and earnings growth. Spending expectations also increased. The survey also found improved expectations for credit access, although respondents reported a third straight month of increasing expectations of missing a debt payment, with the reading in August at its highest since April 2020.

(Source: Reuters)