• After Q223’s real GDP print came in at 3.4% y-o-y (0.9% q-o-q), notably above Fitch Solutions and consensus expectations. Fitch has raised its 2023 growth forecast from 2.3% to 3.0%.
• Notably, this print did mark a deceleration from 4.0% (1.9% q-o-q) in Q123 – following the high figure of 2022 fuelled by a robust harvest at that time. Despite the deceleration, for the first half, the Brazilian economy expanded 3.7%. From a carryover perspective, if Q223’s seasonally adjusted output level is maintained in the remaining two quarters of the year, full-year GDP would grow by 3.1%.
• On a sector level, the agricultural sector contracted by 0.9% q-o-q following the explosive 21.0% growth in Q123, but still increased by 17.0% compared to the prior year. The industrial sector advanced 0.9% q-o-q (boosted by mining), while the services sector added a solid 0.6% (driven particularly by financial services).
• Private consumption, for its part, added 2.0 percentage points (pp) to the 3.4% annual growth rate in the quarter, while net exports added 1.5 pp. Government consumption contributed 0.5 pp, while gross fixed capital formation trimmed 0.5 pp.
• Fitch continues to expect that the Brazilian economy will lose steam in the coming quarters, with growth slowing to 1.4% in 2024, due to the lagged impact of high interest rates and a weaker external backdrop.
• That said, risks to Fitch’s 2023 and 2024 forecasts are to the upside, with some potential for private consumption to continue outperforming Fitch’s expectations. In particular, the Brazilian economy has consistently been surprised by the upside so far this year, with the services sector, in particular, proving to be quite resilient. As a result, there is a risk that even after Fitch’s upward revision the company may still be continuing to underestimate the economy's strength.

 (Source: Fitch Solutions)

• Americans could face a sticker shock with their heating bills this winter, especially if it is a chilly one, due to unusually low U.S. stockpiles of distillate fuels following OPEC+ crude supply cuts and higher demand from Europe, analysts said.
• Distillate inventories, which include diesel and heating oil, were by late August about 15% below the five-year average for this time of year, according to the Energy Information Administration. At below 118 million barrels, stocks represented around 31 days of supply.
• "We are living barrel to barrel and there is just no room for errors in the system," Price Futures Group analyst Phil Flynn said. "If we get a cold winter, there are going to be significant price shocks." Refiners have failed to build sizable stocks ahead of the seasonal surge in demand due to tight supplies of medium and heavy crude oil grades that are distillate-rich.
• Production cuts by the Organization of Petroleum Exporting Countries and its allies, known as OPEC+, have already squeezed the global market for medium sour crude and middle distillates, which will be further tightened by Saudi Arabia's unilateral cuts, said Bjarne Schieldrop, chief commodity analyst at SEB.
• In addition, U.S. exports have helped to deplete stockpiles of the fuel amid strong demand from Europe after Russia's invasion of Ukraine last year led to sanctions on Moscow's energy trade. Inventories have also failed to build despite lackluster U.S. demand in the first half of this year as consumer spending shifted to services over goods.

(Source: Reuters)

• The recent downturn in global property prices is mostly over, with average home prices in major markets now expected to fall less than anticipated at the start of the year and rise into 2024, according to a Reuters poll of property analysts.
• Double-digit price falls that the analysts forecast earlier this year due to rising mortgage rates haven't materialised in full as higher household savings, tight supply, and rising immigration limited declines.
• Many homeowners who locked in cheap mortgages during a long period of near-zero rates, particularly in the United States, have decided to stay put. That has restricted supply and housing market activity.
• But that's more bad news for aspiring first-time homebuyers left on the sidelines for years by tight supply and priced out during the COVID pandemic when existing homeowners outbid them, pushing up house prices at double-digit annual rates.
• Much of the optimism around the unexpected early stabilisation in these markets has stemmed from speculation interest rates have topped out and that as soon as the first half of next year, they'll be coming down again.
• Average U.S. house prices were forecast to stagnate this year and next. In the May and March polls, 2023 values were forecast to fall 2.8% and 4.5%, respectively.
• Affordability is set to remain a problem globally. Overall, a majority of respondents, 55 of 103, who answered a separate question said purchasing affordability for first-time homebuyers would worsen over the coming year. The remaining 48 said improve.

(Source: Reuters)

• For July 2023, output prices for producers in the Mining and Quarrying industry increased by 0.2% while prices in the Manufacturing industry increased by 0.6% as released by the Statistical Institute of Jamaica (STATIN).
• The increase in the index for the Mining and Quarrying industry was attributed to a rise in the index for the heavier weighted major group ‘Bauxite Mining & Alumina Processing’ of 0.2%. The increase in the industry’s index was primarily due to the depreciation of the Jamaican dollar vis-à-vis the United States of America dollar.
• For the period under review, the index for the Manufacturing industry increased by 0.6 per cent. The main contributors to this increase were the major groups, ‘Refined Petroleum Products’, up by 4.1% and ‘Food, Beverages &Tobacco’, the highest weighted major group, which increased by 0.2%. These increases were driven by higher crude prices on the international market and higher raw material costs in the index for ‘Bakery Products and Sugar Cocoa, Coffee, Chocolate & Sugar Confectionary. Tempering the upward movement of the industry was a decline of 1.9% in the index for the major group ‘Chemicals and Chemical Products’.
• For the period July 2022 - July 2023, the index for the Mining & Quarrying industry increased by 5.9% mainly due to a similar 5.9% upward movement in the index for the major group 'Bauxite & Alumina Processing. The index for the Manufacturing industry decreased by 1.9% due to a fall of 20.2% in the index for the major group ‘Refined Petroleum Products’. However, there were increases in the index for the major groups ‘Food, Beverages & Tobacco’ (2.9%) and ‘Chemicals & Chemical Products’ (2.8%) ‘
• The Producer Price Index (PPI) is a significant economic indicator that tracks the average fluctuation in selling prices that domestic producers of goods and services experience over time. There was a minor dip in the PPI in June, however, the decision by OPEC+ to curtail oil supply could potentially escalate producer prices. This is due to the fact that a reduction in oil supply could drive up costs related to transportation and electricity. However, the supply cut has failed to significantly influence oil prices thus far.
• The recent development of Russia backing out of the grain deal could indeed have implications for food prices, and subsequently, the PPI. If the withdrawal from the deal leads to a shortage in grain supply, it could drive up the cost of grain-based products. This could result in an increase in the index for the major group 'Food, Beverages & Tobacco', thereby influencing the overall PPI. However, the extent of this impact would depend on the severity of the grain shortage and the responsiveness of the market to these changes.

(Source: STATIN)

• The IMF Executive Board concluded its first review under Jamaica’s Precautionary and Liquidity Line (PLL). The PLL serves as insurance against shocks, with access at about US$611Mn. The authorities continue to treat the PLL as precautionary.
• The IMF Executive Board also concluded the first review under the Resilience and Sustainability Facility (RSF) arrangement, making available about US$255Mn under the RSF. Jamaica’s commitment to macroeconomic stability and strong policy frameworks have allowed the country to navigate a difficult global environment. The authorities have continued to enhance fiscal, financial, and AML/CFT policy frameworks, and are implementing an ambitious climate policy agenda.
• IMF noted that entrenched macroeconomic stability and sound policy frameworks continue to support economic growth, allowing Jamaica to navigate a complex global environment. A large primary fiscal surplus continues to support a strong downward trajectory of public debt, the financial system remains well-capitalized, liquid, and stable, and inflation is converging to the midpoint of the Bank of Jamaica’s target band.

  (Source: IMF)

• Peru lowered its economic growth forecasts for 2023 and 2024 on Tuesday, August 29, amid poor weather, lower private investment in mining, and anti-government protests earlier this year.
• According to Peru's official gazette, the economy ministry now projects that the country's economy will grow by just 1.1% this year, after data indicated a contraction in the economy during the first half of 2023. This is a significant downward revision from a prior estimate of 2.5% growth.
• This figure would mark the slowest annual growth since 2009, excluding coronavirus-dampened 2020. The Peruvian Fiscal Council warned the forecast could still be too optimistic and could see further adjustments. Next year, Peru's economy is expected to grow 3.0%, the ministry added, down from a previous estimate of 3.4%.
• As the world's second-largest copper producer, Peru is feeling the impact of falling copper prices, which have dropped from an average of $400 per pound last year to an estimated $380 this year and are projected to be $360 next year. While the metals mining and production sector is still expected to see a 7% growth this year, private investment—primarily in the mining sector—is anticipated to decline by 4.5%. This decline coincides with a slowdown in both the construction and manufacturing sectors of Peru.
• The ministry also pegged Peru's estimated fiscal deficit for this year at 2.4% of gross domestic product (GDP), up from the 1.7% of GDP recorded last year. Meanwhile, Peru's estimated current account deficit was lowered to 1.6% of GDP, down from the 2.1% of GDP previously expected.
• At a press conference on Tuesday, Finance Minister Alex Contreras pledged that the government is actively working to reverse these negative trends. He emphasized that inflation is on a declining trajectory, with the annual rate expected to ease to 4% by the end of the year. Contreras also noted that international companies, including those from the U.S., have expressed interest in Peru's petrochemical sector.

(Source: Reuters)

• Two-thirds of Latin American startups have laid off staff over the last 18 months, as venture capital funding fell sharply in the region, according to the "Latin America Digital Transformation" report by venture capital fund Atlantico.
• Venture capital funding in Latin America took a significant hit in the second quarter, plunging 65% compared to the same period last year. This decline was more substantial than the global downturn of 49% in venture capital funding for the same quarter.
• As the volume of IPOs recovers globally, venture capitalists and Latin American unicorns (privately held startup companies with a value of over $1Bn.) may return to capital markets. Of the 37 unicorns launched in the region, only seven went public. "We expect at least 10 new companies to list in public markets in 2024," said Julio Vasconcellos, Atlantico managing partner, in a phone interview on Tuesday, August 29.
• Notably, Fintechs are among the fastest-growing startups in the region, with digital payment systems such as the Central Bank of Brazil's PIX scheme helping to increase bank account penetration in the region. About 87% of Chileans and 84% of Brazilians hold bank accounts. Argentina comes next with 72%, although cash continues to be the preferred payment method in Mexico, with only 49% of the population having bank accounts.
• The introduction of a new digital payment system in Mexico, coupled with the proliferation of digital banks, has the potential to revolutionize the country's financial landscape in multiple ways. Enhanced accessibility and affordability could lead to greater financial inclusion, stimulating economic activity through quicker, more secure transactions. This digital shift is likely to not only introduce market competition, thereby compelling traditional banks to improve services, but also provide the Central Bank with more comprehensive data for effective monetary policy, ultimately positioning Mexico as a more competitive player in the global financial market.

(Source: Reuters)

• The U.S. economy grew at a slightly less brisk pace than initially thought in the second quarter (2.1% vs. forecasted 2.4%) as businesses liquidated inventory, but momentum appears to have picked up early this quarter as a tight labour market underpins consumer spending.
• The report from the Commerce Department on Wednesday also confirmed that inflation pressures moderated last quarter. The economy continues to expand despite 525 basis points worth of interest rate hikes from the Federal Reserve since March 2022.
• "The downgrade to second-quarter GDP growth will be welcomed by Fed officials and reinforces our expectations for a policy pause in September but the door will remain open to further tightening," said Lydia Boussour, a senior economist at EY-Parthenon in New York. "Data point to steady economic momentum into the second half of the year and confirm that a recession isn't on the near-term horizon."
• There were also downward revisions to business spending on equipment and intellectual products. These offset a slight upgrade to consumer spending, which accounts for more than two-thirds of U.S. economic activity. Trade subtracted more from GDP growth than initially estimated.

(Source: Reuters)

• The U.S. economy added more jobs than expected in August, but a rise in the unemployment rate to 3.8% and moderation in wage growth pointed to an easing in labor market conditions, which could bolster expectations that the Federal Reserve will not raise interest rates this month.
• Nonfarm payrolls increased by 187,000 jobs last month, the Labor Department said in its closely watched employment report on Friday. Data for July was revised lower to show 157,000 jobs added instead of the previously reported 187,000.
• The economy needs to create roughly 100,000 jobs per month to keep up with the increase in the working age population.
• Economists polled by Reuters had forecast nonfarm payrolls increasing by 170,000 jobs last month. Striking Hollywood actors and the bankruptcy of a major trucking company had led economists to anticipate slower job growth in August.
• Though demand for labor is slowing, some services businesses like restaurants, bars and hotels remain desperate for workers. Job openings dropped to the lowest level in nearly 2-1/2 years in July, the government reported this week.
• The unemployment rate increased to 3.8% as more people entered the labor force, from 3.5% in July. It remains below the U.S. central bank's latest median estimate of 4.1% by the fourth quarter of this year.

(Source: Reuters)

• Wisynco Group Limited (Wisynco) recorded a net profit of $4.92Bn for the fiscal year ended June 30, 2023, marking a 21.4% increase year-over-year (yoy).
• The company’s revenues surged 24.7% yoy amounting to 48.71Bn. This record-high revenue came despite production challenges and contributed to a gross profit of $16.86Bn, a 27.2% increase over last year’s $13.25Bn. The company also saw an improvement in its gross margin, which stood at 34.6% this fiscal year, compared to 33.9% in the previous year.
• On the expense side, Selling, Distribution & Administrative expenses (SD&A) for the year totaled $10.95Bn or 28.3% more than the $8.53Bn for the corresponding period of the previous year. This was primarily due to expanded business activity and the corresponding increase in variable costs as well as inflationary increases across all expense categories.
• Wisynco stock price has decreased 2.43% since the start of the calendar year. The stock closed Wednesday’s trading session at $17.24 and currently trades at a P/E of 13.2x which is slightly below the Main Market Distribution & Manufacturing Sector Average of 13.4x.
• In terms of future growth, Wisynco has ambitious expansion plans in the pipeline, including the construction of new facilities to enhance production capacity and introduce new product lines. This marks the company's largest capital expansion to date, and it's expected to positively impact revenue streams and operational efficiencies starting from Q2 of the 2024 fiscal year.

(Source: JSE and NCBCM Research)