• 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)

• Brazil's government slightly reduced the expected primary deficit for the current fiscal year on Friday, September 20, attributing the revision to improved revenues that more than offset the need for a new expenditure freeze to ensure compliance with a spending cap.
• In their bi-monthly revenue and expenditure report, the Planning and Finance ministries revised the primary deficit forecast for 2024 down to 28.3Bn reais (US$5.13Bn) from 32.6Bn reais (US$5.9Bn) in July. The figure remains within the fiscal target of a zero deficit for the year with a tolerance margin of 0.25 percentage points of GDP in either direction, which allows for a shortfall of up to 28.8Bn reais.
• In the July report, the deficit was estimated precisely at 28.8Bn reais, factoring in the effects of a total spending freeze of 15Bn reais that the ministries had stated would be necessary at the time. Now, the need to block spending has dropped to 13.3Bn reais, they said. This is partly due to the reversal of a previously frozen 3.8Bn reais, which had been blocked two months ago due to lower revenue expectations.
• The government now has improved its revenue projections, driven mainly by a recent law implementing measures to offset a costly payroll tax exemption and the expectation of larger dividends. At the same time, the government announced the need to block an additional 2.1Bn reais in spending this year to meet current budgetary rules that limit expenditure growth.
• Under the new fiscal framework approved by President Luiz Inacio Lula da Silva last year, spending can only increase by 2.5% above inflation in 2024. In practice, this means that when estimates for mandatory expenditures rise, the government must cut other spending to stay within the cap.
• The Planning and Finance ministries said the new move was necessary to offset rising projections for social security this year, which many economists said the government had already underestimated.

(Source: Reuters)

• U.S. business activity was steady in September, but average prices charged for goods and services rose at the fastest pace in six months, potentially hinting at a pickup in inflation in the coming months.

• S&P Global said on Monday that its flash U.S. Composite Purchasing Managers' Index (PMI) Output Index, which tracks the manufacturing and services sectors, was little changed at 54.4 this month compared to a final reading of 54.6 in August. A reading above 50 indicates expansion in the private sector.

• September's reading aligns with reports this month, including retail sales, that have suggested the economy maintained its solid growth momentum in the third quarter. However, uncertainty about the Nov. 5 presidential election is weighing on business sentiment.

• The services sector continued to expand at a steady pace, though manufacturing slumped to a 15-month low. Average prices charged for goods and services rose at their quickest pace since March, marking the first acceleration of selling price inflation in four months. The survey's measure of prices paid by businesses for inputs increased to a one-year high of 59.1 from 57.8 last month. Its gauge of prices charged rose to 54.7 from 52.9 in August.

• Rising costs, mostly in the services sector linked to wage raises, were attributed for the increase. At face value, this would suggest that price pressures were building up again, but there is growing evidence that inflation is cooling. That is, the labour market has slowed considerably this year, with the unemployment rate rising above 4.0% from 3.4% in April 2023 and is likely no longer a threat to inflation.

• "The early survey indicators for September point to an economy that continues to grow at a solid pace," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "A reacceleration of inflation is meanwhile also signaled, suggesting the Fed cannot totally shift its focus away from its inflation target as it seeks to sustain the economic upturn."

(Source: Reuters)

• Euro zone business activity contracted sharply and unexpectedly this month as the bloc's dominant services industry flatlined, while a downturn in manufacturing accelerated, a survey showed on Monday. The downturn appeared broad-based with Germany, Europe's largest economy, seeing its decline deepen while France - the currency union's second biggest - returned to contraction following August's Olympics boost.

• That fueled bets for more policy easing by the European Central Bank and the euro fell sharply.

• HCOB's preliminary composite euro zone Purchasing Managers' Index (PMI), compiled by S&P Global, sank to 48.9 this month from August's 51.0, below the 50 mark that separates growth from contraction for the first time since February.A Reuters poll predicted a modest decline to 50.5.

• Overall demand fell at the fastest rate in eight months. The new business index plunged to 47.2 from 49.1. A services PMI sank to 50.5 from 52.9, below all expectations in the Reuters poll, which had predicted a more modest decline to 52.1. Euro zone government bond yields tumbled on the data, with yields on German debt falling the most.

• Germany's economy contracted 0.1% in the second quarter and Monday's survey suggested it had extended its downturn in the third. A recession is normally defined as two consecutive quarters of contraction. "A technical recession seems to be baked in," said Cyrus de la Rubia, chief economist at Hamburg Commercial Bank, forecasting Germany's economy would shrink by 0.2% this quarter.

(Source: Reuters)

• For the year ending June 2024, Fontana’s earnings fell by 10%, despite robust topline growth as expenses climbed.
• Revenues rose 10% owing to the contribution from the company’s seventh retail store, which opened Portmore, accounting for much of this increase. For the year revenues totaled $8.13Bn, Fontana’s highest annual revenue to date. With the new location customer count and transaction size improved, and there was growth across all product lines and segments.
• Notwithstanding the topline growth, expansion efforts can be costly, as evidenced by the 23.3% increase in operating costs following the opening of Fontana’s Waterloo store in 2020. This year mirrored that trend, with operating expenses rising by 25.5% to reach $2.36Bn in 2024. The increase was largely driven by costs related to the new Portmore store, including salaries and staff training, as well as expenses for the company’s 55th-anniversary celebration. With the increase in costs, operating profit declined by 6.6%.
• Furthermore, the taxation charge increased significantly to $40.05 million due to the company entering the second phase of its tax benefits in January 2024, which offers a 50% tax remission compared to the 100% remission received in the first phase.
• Fontana’s stock price has decreased by 24.1% since the start of the calendar year. The stock closed Thursday’s trading session at $7.60 trading at a P/E of 16.2x, below the Junior Market Distribution Sector Average of 19.0x.
• The back-to-school and holiday seasons have traditionally been strong periods for the company’s finances, and we anticipate similar trends for 2025. However, with the economy showing signs of slowing and projected to contract, the company may encounter challenges that could impact its performance.

(Source: JSE & NCBCM Research)

• Agriculture, Fisheries and Mining Minister Hon. Floyd Green is advocating for enhanced collaboration between the local engineering industry and the agricultural sector to bolster food security. His call emphasises the importance of developing machinery and equipment that can improve productivity and resilience in farming.
• Speaking at the Jamaica Institution of Engineers’ Engineers Week Conference on September 17^th, Minister Green highlighted the critical role engineers play in adapting agriculture to the increasing frequency and severity of climate-related weather events. He stated, “Agriculture and engineering go hand in hand,” and urged engineers to focus on transforming traditional agricultural practices into more efficient and productive processes.
• The Minister underscored engineers’ technical expertise as essential for designing and implementing the necessary infrastructure to address climate challenges. He cited the Essex Valley Irrigation Scheme, which aims to provide irrigated water to 1,200 hectares of arable land in south St. Elizabeth and south Manchester through the construction of wells and related infrastructure.
• Reflecting on the recent impacts of Hurricane Beryl, Minister Green pointed to the significant agricultural losses, which included 688,000 square feet of destroyed greenhouses affecting 224 farmers and resulting in an estimated cost of $856Mn. He emphasized the necessity of innovating greenhouse designs to withstand stronger storms, stating that these structures are crucial for maintaining food supply during adverse weather conditions.

 (Source: JIS)