• Chile's central bank said in a report on Tuesday, May 7, that the economy is broadly recovering, though some sectors have lagged and financial market depth has not yet returned to levels seen before the coronavirus pandemic.
• The bank pointed to the South American country's commercial, construction and real estate sectors as having fallen behind, which it said had elevated the possibility of defaults. "The external scenario continues to be the main source of risks for local financial stability," according to the bank. Meanwhile, the finances of local companies and individuals had broadly improved, it said in a half-year stability report.
• The monetary authority added that in the consumer sector, while more people were failing to meet mortgage payments, this remained at a relatively low level. Household finances were overall seen stabilizing thanks to rising incomes and smaller financial burdens, according to the report.
• The document stipulated that external macroeconomic risks highlight the importance of strengthening the resilience of local agents and the domestic financial market. It also flagged risks including uncertainty regarding U.S. monetary policy and rising global debt.
• Chile's inflation rate, which hit 30-year highs in 2022, has been converging to the bank's 3% target, pushing the bank to lower its benchmark interest rate from a high of 11.25% to its current level of 6.5%.
• The report comes a day after the central bank board unanimously voted to keep capital requirements for risk assets at the same level since last May, a measure intended to boost the economy's resilience in the face of severe stress scenarios.

(Source: Reuters)

• Federal Reserve Bank of Boston President Susan Collins said on Wednesday that the U.S. economy needs to cool off as an avenue toward getting inflation back to the central bank’s 2% target. “A slowdown in activity will be needed to ensure that demand is better aligned with supply for inflation to return durably” to the official target, Collins said in remarks to be delivered at a Massachusetts Institute of Technology event.
• For now, when it comes to monetary policy, “the recent upward surprises to activity and inflation suggest the likely need to keep policy at its current level until we have greater confidence that inflation is moving sustainably toward 2%,” she said.
• The persistence of price pressures has generated considerable uncertainty over when the central bank might be able to cut interest rates. In recent appearances, many Fed officials have kept alive the prospect of an easing, but have backed off from providing any sort of period for lowering rates while they watch data for progress on lowering inflation.
• That said, getting inflation to 2% “will take more time than previously thought,” with Collins noting “There is no pre-set path for policy – it requires decisions based on a methodical, holistic assessment of wide-ranging information.”
• Collins also said in her remarks that longer-run inflation expectations have been consistent with the Fed’s 2% inflation goal, and she said that the recent jump in productivity is likely not the making of an enduring trend. Collins also said that employers are likely able to absorb higher wage demands.

(Source: Reuters)

• U.S. wholesale inventories fell in March, confirming that inventory investment was a drag on economic growth in the first quarter. The Commerce Department's Census Bureau said on Wednesday that wholesale inventories fell 0.4% as estimated last month. Stocks at wholesalers rebounded 0.2% in February.
• Economists polled by Reuters had expected that inventories, a key part of gross domestic product, would be unrevised. Inventories dropped 2.3% on a year-on-year basis in March.
• Private inventory investment cut 0.35% percentage point from GDP growth in the first quarter, the government reported last month. It was the second straight quarter that inventories were subtracted from GDP. The economy grew at a 1.6% annualized rate in the January-March quarter, the slowest pace in nearly two years.
• Wholesale motor vehicle inventories slipped 0.1%. There were decreases in wholesale stocks of metals, hardware, paper, medication as well as apparel, groceries, farm products and alcohol. But petroleum stocks increased as did those of lumber, furniture, machinery and computer equipment.
• Excluding autos, wholesale inventories fell 0.5% in March. This component goes into the calculation of GDP. Sales at wholesalers declined 1.3% in March after rising 2.0% in February. At March's sales pace, it would take wholesalers 1.35 months to clear shelves, up from 1.34 months in February.

(Source: Reuters)

• Citigroup CEO Jane Fraser said Monday that consumer behaviour has diverged as inflation for goods and services makes life harder for many Americans.
• Fraser, who leads one of the largest U.S. credit card issuers, said she is seeing a “K-shaped consumer.” That means the affluent continue to spend, while lower-income Americans have become more cautious with their consumption.
• “A lot of the growth in spending has been seen in the last few quarters with the affluent customer,” Fraser told CNBC’s Sara Eisen in an interview. She further notes, “We’re seeing a much more cautious low-income consumer,” Fraser said. “They’re feeling more of the pressure of the cost of living, which has been high and increased for them. So while there is employment for them, debt servicing levels are higher than they were before.”
• The stock market has hinged on a single question this year: When will the Federal Reserve begin to ease interest rates after a run of 11 hikes? Strong employment figures and persistent inflation in some categories have complicated the picture, pushing back expectations for when easing will begin. That means Americans must live with higher rates for credit card debt, auto loans, and mortgages for longer.
• “I think, like everyone here, we’re hoping to see the economic conditions that will allow rates to come down sooner rather than later,” Fraser said. “It’s hard to get a soft landing,” the CEO added, using a term for when higher rates reduce inflation without triggering an economic recession. “We’re hopeful, but it is always hard to get one.”

(Source: CNBC)

• In a move to bolster Jamaica’s developmental landscape, the World Bank Group’s Board of Directors has greenlit a new strategic partnership for the nation for 2024-2027. The newly endorsed Country Partnership Framework emerges as a linchpin in this pursuit, cementing the enduring collaboration between Jamaica and the World Bank.
• With a keen eye on fostering green, resilient, and inclusive development, the plan also aligns with the government’s thrust towards debt reduction and fiscal resilience under three core priorities - amplifying human capital, cultivating higher-quality job opportunities, and fortifying resilience to unforeseen shocks.
• The strategy comes at a pivotal juncture for Jamaica, building on ten years of effective macroeconomic management and fiscal consolidation, and is focused on achieving a higher economic growth rate.
• Over the past decade, Jamaica has made significant strides in reining its public debt, scaling down from a towering 147% of Gross Domestic Product to a more manageable 72.2%. The reduction stands as a testament to the nation’s fiscal discipline and strategic foresight.
• This groundwork laid by Jamaica’s fiscal prudence beckons a new era of productivity enhancement. Embracing technological innovation, nurturing human capital, and fortifying the business ecosystem are earmarked as avenues to propel economic vitality and prosperity.
• Minister of Finance and the Public Service, Dr.Nigel Clarke, underscored the significance of maintaining macroeconomic stability while stoking the flames of economic expansion.

(Source: Caribbean National Weekly)

• The Sangster International Airport (SIA) runway extension is being hailed as a major milestone for Jamaica’s aviation sector, enhancing safety and security, while boosting tourism and trade by attracting more flights, passengers and cargo flows. The extension, which forms part of a US$70 million upgrading programme at the Montego Bay-based airport, has increased the takeoff range from 2662 meters to 3060 meters.
• Minister of Science, Energy, Telecommunications and Transport, Hon. Daryl Vaz, in a speech read by Chairman of the Airports Authority of Jamaica (AAJ), Mark Hart, at the official opening of the enlarged strip on Thursday (May 2), said the airport is now able to accommodate larger aircraft and more flights.
• “SIA plays a critical role in facilitating the transit of more than 85 percent of tourist arrivals to the island. In 2023, the airport alone served over 5.2 million passengers, underlying its vital importance to Jamaica’s tourism and transport sectors,” Mr. Vaz noted.
• He further noted that the runway extension, which includes enhancement of the public road and utility infrastructure, as well as initiatives for shoreline protection and coastal restoration, will strengthen Jamaica’s status and drive economic growth in the resort town.
• Deputy Prime Minister and Minister of National Security, Hon. Dr. Horace Chang, in his remarks at the function, praised SIA as one of the finest airports in the Caribbean. He emphasised the airport’s capacity to absorb long flights and help to maintain Montego Bay as a centre of tourism activities in Jamaica and the Caribbean.
• For his part, Chief Executive Officer (CEO) of MBJ Airports Limited, Shane Munroe, said the runway extension is a “transformative endeavour that signifies a collective commitment to advancing aviation in Jamaica,” while ensuring compliance with the highest standards of the International Civil Aviation Organization. He further noted that the project involved local engineers and contractors, and local materials were utilised in the construction, thus contributing to the nation’s economy and job creation.

• Panama's former security minister Jose Raul Mulino stormed to victory on Sunday, May 5 in a presidential poll dominated by his old boss, the popular ex-leader Ricardo Martinelli, who buttressed his campaign, despite being holed up in Nicaragua's embassy.
• Mulino, 64, was one of the favourites for the presidency after he stepped in to replace Martinelli on the ballot when the former president was barred from running due to a money laundering conviction, which rendered him ineligible.
• With 95.9% of the votes counted and no runoffs, Mulino of the Realizando Metas party (centre-right) had won a simple majority of the vote (34.3%). In the national assembly, with 40.6% of the votes counted so far, the Realizando Metas had also won the largest unified bloc in the body 13 seats (out of 71 seats). The incumbent Partido Revolucionario Democrático (centre-left) won 12 seats. Independents (or undeclared) garnered the most votes with 21 seats.
• While the victory for Mulino was comfortable, he is entering a fraught situation regarding the economy, public finances, and internal politics. Growth is slowing due to sluggish traffic through the Panama Canal, the closure of the Cobre Panamá (3.0% of GDP) copper mine, and a structurally weak construction sector.
•  Meanwhile, slower revenues and persistent deficits in the Social Security Administration will reduce fiscal space for social and capital spending increases, and will likely prompt a push for fiscal reform.
• Finally, Mulino will likely have to balance pleasing his political benefactor, Martinelli, without appearing weak or subordinate in front of his electorate.

(Sources: Reuters and Fitch Solutions)

• A Turkish electricity generation ship with 36 megawatts capacity has arrived at Everton in Region Six to bolster Guyana’s Demerara-Berbice Interconnected System (DBIS) and help mitigate frequent blackouts. The vessel completed its two-week voyage from Cuba and is now preparing to integrate into the national grid.
• Engineers and technical officers from the Guyana Power and Light Company (GPL) are overseeing the final preparations for connecting the ship to the DBIS. Ravindra Jagnandan, the Zone Manager for GPL in Berbice, noted that weather conditions had delayed some preliminary work.
• Once the ship is docked, it will be connected to GPL’s 69-kilovolt network. Further maintenance on transmission lines will follow to facilitate the integration of power from the ship into the grid.
• The vessel is set to be fully operational by May 8, with an expected availability of 96 per cent. It will operate in conjunction with 17 recently acquired generators and six step-up transformers, providing an additional 30 megawatts of power to the grid.
• The Turkish power ship will remain connected to GPL’s network for at least a year as the government undertakes larger projects to enhance power generation, such as the Gas to Shore development in Wales.
• These initiatives are critical steps toward stabilizing Guyana’s electricity supply and meeting the growing demand for reliable energy.

(Source: Caribbean National Weekly)

• Eurozone business activity expanded at its fastest pace in almost a year last month as a resurgence in the bloc's dominant services industry more than offset a deeper downturn in manufacturing, a survey showed on Monday. HCOB's composite Purchasing Managers' Index (PMI) for the currency union, compiled by S&P Global and seen as a good gauge of overall economic health, bounced to 51.7 in April from March's 50.3, surpassing a preliminary 51.4 estimate.
• That was its second month above the 50 mark, separating growth from contraction, and the highest since May last year. "Service providers have now expanded their activity for the third consecutive month, putting an end to the lack of dynamism observed in the second half of last year," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
• The services PMI leaped to 53.3 from 51.5, above the flash estimate of 52.9 and its highest reading since last May. A sister survey released last week showed factory activity in the eurozone took a turn for the worse in April, highlighting the divergence between the two sectors.
• Overall optimism about the year ahead remained buoyant. The composite future output index dipped only slightly from March's 61.6 - its highest since February 2022 - to 61.6. Suggesting that services firms expect the rebound to continue, they increased headcount at the fastest pace in almost a year, with the employment index climbing to 53.5 from 52.3.
• "Encouragingly, employment has increased at a faster rate, aligning with the uptick in new business and the growth of the order book, which has seen its strongest expansion in eleven months," de la Rubia added.

(Source: Reuters)

• The dream of home ownership has gotten even further away for renters, with higher housing costs and elevated interest rates standing in the way of the American housing dream, according to a New York Federal Reserve survey released Monday.
• The share of renters as of February who possess hopes of “residential mobility,” or the belief from renters that they one day will be able to afford a home, fell to a record low 13.4% in the central bank’s annual housing survey for 2024. That’s down from 15.0% in 2023 and well off the 20.8% series high back in 2014.
• Pessimism about prospects comes amid a confluence of factors conspiring against the likelihood of renters being able to transition to home ownership. For one, some 74.2% of renters viewed obtaining a mortgage as somewhat or very difficult, which the New York Fed said has “deteriorated substantially” from the 66.5% level in 2023 and 63.1% in 2022.
• Moreover, mortgage rates have remained high by historical standards. A 30-year fixed-rate mortgage now carries an average 7.22% borrowing rate, the highest since late November 2023, according to Freddie Mac.
• Housing affordability has improved little, with the median price in February at $388,700, the highest since November, according to the National Association of Realtors. The NAR’s housing affordability index was at 103 in February, down slightly from January but still at elevated levels, with average monthly housing payments at $2,040. Survey respondents expect housing prices to increase 5.1% over the next year, nearly double the 2.6% expected rate in February 2023 and above the pre-pandemic mean of 4.2%.
• Despite prospects for the Fed to cut interest rates before the end of 2024, respondents think mortgage rates are only going to go higher. The outlook for a year from now is that borrowing costs will be 8.7% and 9.7% in three years, both survey records.

(Source: CNBC)