• The consumer price index rose 3.2% from a year ago in July, a sign that inflation has lost at least some of its grip on the U.S. economy. Prices accelerated a seasonally adjusted 0.2% for the month, in line with the Dow Jones estimate, the Bureau of Labour Statistics (BLS) reported Thursday. Nonetheless, the annual rate was slightly below the 3.3% forecast though higher than in June.
• Excluding volatile food and energy prices, core CPI also increased 0.2% for the month, matching the estimate and equating to a 12-month rate of 4.7%, the lowest since October 2021. The annual rate for the core also was slightly below a Dow Jones consensus estimate of 4.8%.
• Almost all of the monthly inflation increase came from shelter costs, which rose 0.4% and were up 7.7% from a year ago. Food prices also climbed 0.2% on the month, and the BLS said energy costs increased just 0.1% even though crude oil prices surged during the month and prices at the pump jumped as well.
• Used vehicle prices declined 1.3% and medical care services were off 0.4%. Airline fares fell 8.1% on the month, the same as in June, and are down 18.6% from a year ago after surging in the early days of the Covid pandemic.
• Together, the latest batch of data shows that while inflation has come well off its 40-year highs of mid-2022, it is still considerably above the 2% level where the Federal Reserve would like to see it and high enough that cuts in interest rates are unlikely anytime soon.
• The elevated rates have yet to put a dent in economic growth: The first half of 2023 had seen GDP post gains of 2% and 2.4% in the first two quarters, respectively, and the Atlanta Fed is tracking third-quarter growth of 4.1%. Payroll gains have been slowing but are still solid, and unemployment is near its lowest since late 1969.
• With that being said more economists are beginning to expect the U.S. can avoid a recession despite the aggressive rate hikes. Bank of America, Goldman Sachs and JPMorgan Chase all recently have forecast that a contraction is becoming less likely.

(Source: Reuters)

• The European Central Bank is on the back foot again and this time the bad news doesn't come from Greece, Italy or any of the usual suspects in the bloc's poorer south. The club's biggest member and supposed powerhouse, Germany, has been hit by a toxic mix of weak trading with key partner China, a slump in its large manufacturing and construction sectors and even some existential questions about a business model predicated on cheap fuel from Russia.
• Trouble in Germany is hobbling growth in the eurozone as a whole and threatening to push it into a recession, rather than the "soft landing" of moderate growth and inflation that the ECB had pencilled in and the United States is still hopeful of achieving. This is forcing a change of tune at the ECB -- from ruling out a pause in its steepest and longest streak of interest rate hikes to openly talking about one as soon as next month.
• Some of Germany's present misfortunes also originate in Russia, on which Berlin had relied for a third of its energy supply until the invasion of Ukraine jeopardized those cheap imports. Others run deeper and are home-brewed, relating to their over-reliance on exports, lack of investment and shortage of labour.
• Some of Germany’s troubles can be traced back to tighter monetary policy. The central bank has consciously dampened economic activity via higher rates in an attempt to bring inflation, which at one point last year was in double digits, to its 2% target. Higher borrowing costs hurt manufacturers particularly hard because they depend on investment and no euro zone country has a larger industrial sector than Germany.
• "To loosen monetary policy because Germany is in a difficult position would be unwise but to tighten it would add macro pressure to the micro-level pressures that beset the economy," Portes added. This puts the ECB in a situation where it must contemplate wrapping up its tightening cycle before witnessing the sustained drop in core inflation it said it wanted to see.

(Source: Reuters)

• LASCO Financial Services Limited (LASF) recorded a net profit of $18.82Mn for the first quarter ended June 30, 2023, representing a 77.3% year-over-year decline in profitability.
• Consolidated income for the period amounted to $574.35Mn, representing a slight improvement of 1.7% when compared to the corresponding quarter of the previous year. This growth was fueled by trading gains, new services and fees.
• Consolidated expenses for the quarter reached $506.53Mn, up $75.60Mn from the previous period. This increase was due to a $15.76Mn (+9.7%) rise in Selling and Promotional expenses, supporting new services. Additionally, administrative costs surged by 22.3%, or $59.81Mn due to the deployment of new services, operational cost inflations, and redundancy packages.
• LASF’s stock price has decreased by 25.4% since the start of the calendar year. The stock closed Wednesday’s trading session at $2.15 and currently trades at a P/E of 18.3x which is above the Junior Market Financial Sector Average of 17.0x.
• Several foundational activities were embarked upon in the first quarter, significantly increasing expenses. Notable among them were increased advertising, aimed at promoting key services in anticipation of growth in subsequent quarters. Additionally, a reduction in permanent staff positions due to reorganization aims to enhance efficiency and control future expenditures. As a result of these restructuring efforts and reduced fixed costs, an improvement in results is anticipated for the remainder of the financial year.

(Source: JSE)

• Fitch Solutions has slightly raised its end-2023 loan growth forecast for Brazil from 5.6% to 7.0%, as the company now expects lower interest rates in the second half of the year.
• The Banco Central do Brasil (BCB) is expected to reduce its policy Selic rate from the current 13.25% to 11.75% by year's end, revised from a previous estimate of 12.50%.
• While interest rates will remain historically high, the slowdown in credit growth will be less severe than earlier projections.
• Credit growth for both households and corporates has been on a steady downtrend since mid-2022, as the BCB’s aggressive rate hiking cycle has sharply increased the cost of borrowing. Average interest on new loans increased sharply, while rising rates also increased the cost of debt repayment to new all-time highs, reducing the willingness of households to take new loans.
• Notwithstanding, lending conditions will improve in 2024 as rates come down, consumers remain in good shape and the state-owned BNDES (Brazilian Development Bank) ramps up subsidised lending. Asset quality in the banking sector will also improve as interest rates moderate in the coming quarters, supporting the stability of the financial sector.

(Source: Fitch Solutions)

• Financial inclusion has long been discussed in relation to its positive impact on economies. The merits of financial inclusion are strongly rooted in empowerment when access to financial tools and credit are accessible and become enablers of positive societal and economic outcomes.
• According to the latest data provided by Mastercard and Americas Market Intelligence report, "The State of Financial Inclusion Post COVID-19", account ownership in the region has increased 20 percentage points, from 55% in 2017 to 74% in 2021, as cited from the latest Findex report. 
• This positive momentum is a clear indication that collaboration among ecosystem players has never been more relevant in accelerating the adoption and use of financial solutions across markets.
• However, the report highlights the prevalent gaps in access to the financial system in Latin America and the Caribbean, where 26% of adults still do not have an account.
• It is not just about having an account but rather about using it. Usage is a challenge in many countries, where large segments of the population may have an account but still use cash to pay for everyday daily necessities, and ownership of specific products such as credit cards or loans only reaches certain segments of the population in urbanised areas.
• Financial inclusion has become a foundational pillar for growth across the Latin American and Caribbean region and thus cannot be ignored. Countries are therefore faced with the task of striving to have a network of concurrent transactions that adequately promotes the acceleration of financial technology.

(Sources: Mastercard and Americas Market Intelligence)

• In July China's consumer sector fell into deflation and factory-gate prices extended declines as the world's second-largest economy struggled to revive demand and pressure mounted on Beijing to release more direct policy stimulus.
• China's post-pandemic recovery has slowed after a brisk start in the first quarter as demand at home and abroad weakened and a flurry of policies to support the economy failed to shore up activity.
• The consumer price index (CPI) dropped 0.3% year-on-year in July compared with the median estimate for a 0.4% decrease in a Reuters poll. It was the first decline since February 2021. Additionally, the producer price index (PPI) declined for a 10th consecutive month, down 4.4% and faster than the forecast 4.1% fall. China is the first G20 economy to report a year-on-year decline in consumer prices since Japan's last negative headline CPI reading in August 2021 and the weakness adds to concerns about the hit to business among major trading partners.
• "For China, the divergence between manufacturing and services is increasingly apparent, meaning the economy will grow at two speeds in the rest of 2023, especially as the problem in real estate re-emerges," said Gary Ng, Asia Pacific senior economist at Natixis. "It also shows China's slower-than-expected economic rebound is not strong enough to offset the weaker global demand and lift commodity prices."

(Source: Reuters)

• Millions of families are borrowing to cover basic bills and expenses, according to an analysis that warns Britain is entering a dangerous new phase of the cost of living crisis.
• Political attention has focused on the impact of interest rates on mortgage payers, but they are also having an impact on those on tight budgets. In many cases, the option of borrowing is being cut off.
• Nearly 6 million low-income families have unsecured debt, such as credit cards, overdrafts and personal loans from banks, credit unions and payday lenders. In May this year, they owed £14.2bn in total. Interest on this debt was £3.9bn, equivalent to about £675 a year per family.
• Using credit to pay bills is not preventing households from falling behind with payments. Three-quarters of the respondents report arrears with at least one household bill or lending commitment, with 44% in arrears with three or more bills. Meanwhile, 2.8 million low-income households said they had been refused a loan between May 2021 and May 2023.
• “Despite inflation falling back, we risk the tragedy of a second wave in this crisis, as millions of people struggle to maintain their borrowing given rising interest rates. The fragility of the current situation ought to be a preoccupation for policymakers everywhere, but on the contrary, it is in danger of being overlooked. While rising mortgage costs dominate the national conversation, the affordability of short-term credit should also be a factor of vital concern,” said Rachelle Earwaker, Senior Economist at JRF.

(Source: The Guardian)

• PROVEN Limited recorded a net profit attributable to shareholders of US$2.78Bn for the first quarter that ended June 30, 2023. This represents a 59.3% yoy increase in profitability and was derived from strong performances in most of the operating divisions, particularly from better-than-budgeted results for the banking division during the quarter.
• Profits were driven by higher net interest income due to increases in interest rates; strong operations from the manufacturing subsidiary; and the sale of residential developments in Grand Cayman. This outweighed a decline in fee and commission income that stemmed from the downturn in regional and international investment space.
• For the quarter, expense growth was moderate (+ 8.1%) to end the quarter at US$15.71Mn compared to US$14.53Mn in the prior year, mainly due to an increase in other operating expenses, offset by a write-back of IFRS 9 provisioning.
• PROVEN’s stock price has decreased by 20.3% since the start of the calendar year. The stock closed Wednesday’s trading session at $22.37 and currently trades at a P/B of 0.9x which is below the Main Market Financial Sector Average of 1.5x.
• Management expects PROVEN Bank and PROVEN Properties will help to drive near-term performance. The high-quality assets of PROVEN bank, which mainly comprises variable rate residential mortgage loans in Cayman and a portfolio of investment grade bonds with a relatively low duration, are well positioned to benefit from the current high-interest rate environment. The Group, therefore, expects that the Banks will continue to perform very well over the coming quarter.
• As it relates to PROVEN Properties, the company has indicated that it will continue to opportunistically expand the portfolio by executing creative deal structures and targeted marketing campaigns that will extend its deal pipeline in Jamaica, Grand Cayman and Barbados. The upcoming year will be a busy one consequent on the launch of two major residential development projects, Sol Harbour in Ocho Rios and Bahari in Runaway Bay. The company will also focus on growing its industrial real estate portfolio with the completion of the Aashgo warehouses in Grand Cayman and ground-breaking for the Kingston Gateway Warehouses in Jamaica in the current financial year.

(Source: JSE)

• Rising consumer prices in Mexico likely slowed in July, which would mark the sixth straight monthly inflation rate drop, a Reuters poll showed on Monday, August 7. However, bets indicate that the central bank's key borrowing rate will likely remain at its record high.
• The median forecast of 11 analysts surveyed was for annual inflation to ease to 4.78% in July, which would be the lowest rate of rising prices since March 2021, after it rose to a record 8.7% last year. Meanwhile, annual core inflation, which strips out some volatile food and energy prices, is forecast to slow to 6.67% year-on-year, which would mark its lowest level since February 2022. 
• The Bank of Mexico (Banxico), which has an inflation target of 3% plus or minus one percentage point, in late June, voted to keep its benchmark interest rate steady at a historic high of 11.25%, suggesting it might need to keep it there for an extended time as it seeks to bring inflation down to its target.
• In May, Banxico ended a rate hiking cycle launched in 2021, which raised its benchmark rate by a total of 725 basis points. Banxico will announce its next rates decision on Thursday.
• Last month, consumer prices likely rose 0.48% compared to June's rate, while core inflation in July is forecast up by 0.41%, according to the poll.

(Source: Reuters)

• The Panama Canal, an engineering wonder allowing ships to travel between two oceans, is seeking to adapt to climate change after a biting drought has seen traffic and income dry up.
• The canal relies on rainwater to move ships through a series of locks that function like water elevators, raising the vessels up and over the continent between the Atlantic and Pacific Oceans. However, a water shortage due to low rainfall has forced operators to restrict the number of vessels passing through
• When it operates at full capacity, about 36 to 38 ships transit it daily. However, the canal authority says this will likely drop to between 30 and 32 ships as it continues to roll out water efficiency measures.
• As a result, it expects the waterway’s revenue to shrink by about €182 million (US$231Mn) in the next fiscal year, which starts in October, canal administrator Ricaurte Vasquez said Thursday, August 3.
• Additionally, there are fears that conditions may deteriorate further. As the region experiences an extended dry season, authorities say the start of the El Niño weather phenomenon could worsen conditions as the normal patterns of tropical precipitation and atmospheric circulation are disrupted, hence triggering extreme climate events around the globe including droughts in some areas and floods in others.

(Source: Euro News)