• Services activity in Brazil grew more than expected in June to hit an all-time high, eclipsing a record that had been set in December 2022, data from statistics agency IBGE showed on Tuesday.
• The service sector, which accounts for about 70% of all activity in Latin America's largest economy, grew 1.7% in June from the previous month, exceeding the 0.8% expected by analysts polled by Reuters.
• IBGE said that all five main groups surveyed by the agency posted positive results in the period, with a 1.8% expansion in transportation notably offsetting a negative reading in the previous month. "The result is largely due to air transport, driven by a drop in air ticket prices," IBGE research manager Rodrigo Lobo said.
• Services activity was also up 1.3% in June from a year earlier, according to IBGE, again beating the 0.8% expected by economists in the Reuters poll. The sector now stands 0.5% above the previous record high in the IBGE data series, which had been set in late 2022, the statistics agency added.
• "Our assessment indicates that Brazil's economic activity continues to perform well," said PicPay economist Igor Cadilhac, highlighting a strong labor market. "We expect this scenario to continue throughout the year, despite recent deterioration in inflation and the need to keep interest rates high for longer."
• Brazil's central bank recently flagged greater caution in its monetary policy stance and said it would raise interest rates if needed to control inflation. The country's benchmark interest rate, Selic, currently stands at 10.5%.

(Source: Reuters)

• Oil prices climbed on Wednesday on estimates about shrinking U.S. crude and gasoline inventories as the market watched for a possible widening of the Middle Eastern war, which could curtail global oil supplies.
• U.S. crude oil and gasoline inventories were expected to have fallen last week, while distillate stocks rose, according to market sources, citing American Petroleum Institute data (API) on Tuesday.
• The API figures showed crude stocks shrunk by 5.21 million barrels in the week ended Aug. 9, the sources said, speaking on condition of anonymity. Gasoline inventories eased by 3.69 million barrels, and distillates rose by 612,000 barrels. Falling inventories could indicate higher demand in the U.S., the world's biggest oil consumer.
• The market was also awaiting signs of the next moves by Iran, which has vowed a severe response to the killing of a Hamas leader late last month, which Tehran blamed on Israel. Israel has neither confirmed nor denied its involvement. The U.S. Navy has deployed warships and a submarine to the Middle East to bolster Israeli defenses.
• A broadening conflict in the region could affect crude supplies from Iran and neighboring producer countries, analysts said, tightening inventories and supporting prices.
• Keeping oil prices from moving even higher, the International Energy Agency (IEA), meanwhile, kept its 2024 global oil demand growth forecast unchanged on Tuesday but trimmed its 2025 estimate, citing the impact of a weakened Chinese economy on consumption.

(Source: Reuters)

• British pay grew at its slowest pace in nearly two years, likely reassuring the Bank of England that inflation pressures are easing, and there was a surprise drop in unemployment, official figures showed on Tuesday.
• Average weekly earnings, excluding bonuses, were 5.4% higher than a year earlier in the three months to the end of June, down from 5.8% in the three months to May and the lowest since August 2022, the Office for National Statistics said. However, the jobless rate - based on a survey the ONS is currently overhauling - fell from 4.4% to 4.2%, its lowest since February, bucking expectations of a rise in a Reuters poll of economists.
• When it cut interest rates on Aug. 1 after keeping them at a 16-year high of 5.25% for nearly a year, the BoE said it would continue to keep a close eye on wage growth. Investors see a roughly one-in-three chance of a September BoE rate cut. Importantly, pay is still growing at nearly double the pace the BoE thinks is compatible with keeping inflation at its 2% target. Data on Wednesday is likely to show inflation back above target.
• "Today's data are consistent with a gradual and cautious dialling down of restrictive policy. But ... firming GDP growth, if sustained, could lead to a firming labour market recovery - which could result in a more shallow rate-cutting cycle," said Sanjay Raja, chief UK economist at Deutsche Bank.

(Source: Reuters)

• Despite revenue growth, Seprod’s net profit attributable to shareholders declined by 6.6% (or $123.97Mn) to $1.76Bn for the six months ending June 30, 2024, compared to the prior year.
• The falloff in net profit was primarily due to the performance of its Trinidad subsidiary, A.S. Bryden Holdings (ASBH), which saw net profit attributable to shareholders declining by 41.3% (or TT$20.40Mn) due to expiration of one-off benefits which the company had in 2023 and higher than planned finance costs to acquire foreign exchange.
• Revenues for Seprod amounted to $58.33Bn, a 7.1% (or $3.87Bn) increase, compared to the $54.46Bn in 2023. The business benefited from a 27% increase in export sales and has been regaining lost margarine market share (in the domestic and export markets), which occurred during 2023 when the company embarked on the modernisation of its margarine plant.
• Direct expenses also increased 6.8% (or $2.77Bn); however, revenue growth outpaced the increase in direct expenses causing the gross margin to rise slightly to 25.6% of revenues from 25.4% in 2023.
• The overall effect of revenue growth was tempered by a 9.1% (or $890.38Mn) increase in operating expenses to $10.63Bn and a 21.8% (or $315.10Mn) increase in finance cost. The increase in finance cost included costs associated with foreign exchange, which has been increasing largely due to foreign exchange shortages in Trinidad and Tobago.
• Seprod’s stock price has appreciated marginally by 0.5% since the start of 2024 and closed Monday’s trading session at $80.11 per share. At this price, the stock trades at a P/E of 20.6x, which is above the Main Market Distribution & Manufacturing sector average of 13.1x.

(Sources: JSE & NCBCM Research)

• For the six months ending June 30, 2024, Fosrich Company Ltd. reported an unaudited net profit of $77.88Mn, a 52.07% (or $3.46Mn) decline year-over-year. A deterioration in its topline (revenues fell 13.8% or $280.19Mn) and an increase in administrative costs of 24.7% (or $129.89Mn) were the primary contributors to Fosrich’s weaker performance.

• Revenues decreased to $1.74Bn from $2.02Bn in 2023, due to the slowness in housing-starts locally, caused primarily by the considerable increase in interest rates in Jamaica in the current period when compared to the prior year.

• On the other hand, cost of sales declined by 28.0% (or $338.01Mn) to $868.79Mn driven by the substantial fall in solar panel and PVC ingredients prices on the world markets. The reduction in cost of sales outpaced the decline in revenues evidenced by gross margin increasing from 40.4% in June 2023 to 50.2% in June 2024.

• However, the bottom-line performance was tempered by an increase in administrative expenses of 24.66% (or $129. 89Mn).  These increases were derived from increased staff related costs for salary adjustments, improvements in staff benefits, increased marketing costs, increased travelling and motor vehicle expenses, and increased insurance costs due to increases in both policy renewal rates and exposure.

• During the quarter ending June 2024, Fosrich opened two new stores at Bayside in Montego Bay and Drax Hall in St. Ann. Construction of the new FosRich Superstore & Corporate Offices at 76 Molynes Road is advance, with the completion date now projected to be Q3, 2024. Management anticipates accelerated revenue growth largely stemming from its recent expansions and noted that the superstore has the potential to surpass $2Bn in sales.

• Fosrich’s stock price has decreased by 12.0% since the start of the year and closed Monday’s trading session at $2.20 per share. At this price, the stock trades at a P/E of 73.3x earnings, which is well above the Junior Market Distribution sector average of 16.17x earnings, suggesting that investors may still be optimistic about the company’s future growth prospects despite recent earnings decline.

(Sources: JSE and NCBCM Research)

• The economy of Grand Bahama has expanded by 10.8%, while New Providence, produced “unmatched” economic expansion in 2023, according to the Bahamas National Statistical Institute (BSNI).

• “Accommodation and food services showed an increase of $436Mn, and arts, other services and household employment, extra-territorial organizations increased by $208Mn. In 2023, New Providence represented 77% of the overall economy of the Bahamas and the island’s economic contribution jumped from $9.937Bn in 2022 to $11.027Bn, representing a nine-year high in The Bahamas,” the report said.

• According to the report, the impact of tourism on the islands was evident beginning in 2020, although exponential growth was experienced during the period 2021 to 2023. The industrial grouping, real estate, owner-occupied and actual rents led the increase at 28%, while the accommodation and food services, arts, other services, household employment, and extraterritorial organizations grew by 23% compared to 2022.

• Overall, New Providence remained the economic powerhouse, accounting for 77% of the Bahamas’ GDP in 2023, and has seen a robust 11% increase in economic activity, mainly in the services sector.

(Source: MagneticMedia)

• The Costa Rican economy continues to stand out for its resilience and capacity for growth. Despite global instability, with wars in Ukraine and tensions in the Middle East, as well as the escalation of geopolitical disputes between China and the United States, Costa Rica achieved growth of 5.1% in 2023.

• Although moderation is anticipated for 2024 and 2025, with rates expected to exceed 3.5%, the country continues to take advantage of opportunities to maintain sustainable economic development, despite external and internal challenges.

• “Despite the fact that the international economy is going through a moment of fragility, we have seen that the Costa Rican economy has continued to grow at good rates. This is due, in part, to a projected slowdown for the North American economy, which continues to be our main trading partner, source of investment and tourism. Also influencing is the appreciation of the exchange rate, which is affecting some sectors, and the normalization of household consumption, which was very high in 2023,” said Rodrigo Cubero, former president of the Central Bank.

• “If there is very strong pressure to increase the exchange rate, the Central Bank will possibly move its monetary exchange rate policy instruments to prevent a very disorderly, rapid and violent adjustment in the exchange rate, especially upwards, endangering its inflation target. We would see an exchange rate that will possibly remain with a slight upward trend, but fluctuating at levels that this year could range between 520 and 540 colones per dollar,” added Cubero.

• The interest rate in Costa Rica in colones is highly determined by the Monetary Policy Rate (MPR) of the Central Bank. At this time, the MPR is at 4.75% and the Central Bank has expressed that it does not anticipate that it will move before the United States Federal Reserve does so, which is expected from September.

• Middle- and low-income U.S. families now have significantly fewer liquid resources like bank deposits than they were on track to have before the disruptions of the COVID-19 pandemic, creating financial strains that pose a risk to consumer spending, the backbone of the economy.

• Research published on Monday by the Federal Reserve Bank of San Francisco showed that for the top 20% of households by income, liquid assets - including cash and funds in savings, checking and money market accounts - rose sharply in 2020 into early 2021. They then dropped gradually and are now about 2% below what would have been expected without the pandemic shock.

• However, for the rest of American households, those liquid assets rose less sharply and the excess was depleted earlier and is now about 13% lower than the projected path prior to the pandemic. At the same time credit card delinquencies among these middle- and low-income families rose earlier, faster, and to "notably higher" rates than for high-income families, they showed.

• S. central bankers have said that continued strength in the real economy has given them room to hold the policy rate in its current 5.25%-5.50% range so as to keep up the downward pressure on inflation. However, recent economic data including a report showing a jump in the unemployment rate to a post-pandemic high of 4.3% and a slowdown in hiring in July - have fueled fears that policy may be becoming too restrictive.

• While consumer spending contributed significantly to the stronger-than-expected pace of economic growth in the second quarter, its monthly growth rate has slowed. Spending growth averaged 0.3% in the three months through June, its slowest average pace in more than a year. Last week, Chicago Fed President Austan Goolsbee said the uptick in credit card delinquencies was among the factors he was watching as a possible sign that policy may be getting tighter than warranted.

(Source: Reuters)

• The US budget deficit exceeded $1.5 trillion with two months to go until the end of the fiscal year, down slightly on 2023 though vastly larger than pre-pandemic times. The $1.52 trillion gap for the 10 months through July was down 6% from the same period last year, Treasury Department data released Wednesday showed. For the month of July, the deficit was $244 billion — 16% smaller than July 2023, adjusted for calendar differences. The adjusted year-to-date narrowing was 5%.

• Higher revenues helped narrow the deficit. Receipts have risen in part because of a deferral of tax deadlines from fiscal 2023 into this year in states that suffered from natural disasters. Affected areas included most of California.

• The interest burden on outstanding US debt remained a major drag on the budget. Interest costs in the first 10 months of the fiscal year totalled $956 billion, up 32% from 2023. The Federal Reserve’s aggressive interest-rate hiking campaign, aimed at quelling inflation, has made debt more expensive to issue for the federal government.

• The weighted average interest rate on outstanding US interest-bearing government debt was 3.33% at the end of July — the highest since January 2010 and up about half a percentage point from a year before.

(Source: Bloomberg)

• TransJamaica Limited recorded net profit of US$13.92Mn for the six months that ended June 30, 2024, a 26.5% yoy increase. The outturn reflects the impact of robust topline growth and modest growth in expenses.
• Aided by higher traffic volumes and movements in the toll tariff, which is reviewed annually, revenue for the six-month period was US$39.65Mn, US$3.44Mn higher when compared to the same period in 2023.
• The company reported operating expenses of US$11.37Mn, marking a 3.8% rise from the US$10.96Mn recorded during the corresponding period in 2023. Elevated intangible amortization and security expenses, which were partly counterbalanced by a reduction in maintenance activities throughout the period, resulted in modest growth in operating expenses.
• However, administrative expenses rose 18.0%, given salary adjustments following a restructuring exercise and the usual annual inflationary increments. The team expanded with the recruitment of extra technical personnel, including a special projects manager tasked with spearheading the infrastructure enhancements throughout the network.
• TransJa's stock price has increased by 13.3% since the start of the calendar year. The stock closed Monday’s trading session at $3.07 and currently trades at a P/E of 9.0x, which is below the Main Market Energy, Industrial, and Materials Sector Average of 9.6x.
• TransJamaican Highway Limited (TJH) recently proposed a US$20.3Mn offer price, along with potential Upside Formula amounts, to acquire the concession to operate Phase 1C of the Highway 2000 toll roads until November 20, 2036. The government’s acceptance is subject to contract and additional conditions. The addition of this new concession should enhance the company's portfolio by introducing a fourth toll road, which is expected to bolster earnings when it becomes operational.

(Sources: JSE and NCBCM Research)