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US Revises Down Last Quarter’s Economic Growth To 2.7% Rate   Published: 24 February 2023

 

  • The U.S. economy expanded at a 2.7% annual rate from October through December, a solid showing despite rising interest rates and elevated inflation, the government said Thursday in a downgrade from its initial estimate. The government had previously estimated that the economy grew at a 2.9% annual rate last quarter.
  • The Commerce Department’s revised estimate of last quarter’s gross domestic product — the economy’s total output of goods and services — marked a deceleration from the 3.2% growth rate from July through September.
  • More recent data issued this month, though, shows that the economy has since rebounded. Consumers boosted retail sales in January by the most in nearly two years, and employers added a surprisingly outsize number of jobs. The unemployment rate reached 3.4%, the lowest level since 1969.
  • Inflation, measured year over year, has cooled since it reached 9.1% in June, having slowed to 6.4% in January. Yet on a monthly basis, price gains accelerated from December to January, raising the prospect that the Fed will raise its benchmark rate higher than it has previously signalled.
  • Higher borrowing costs make mortgages, auto loans and credit card borrowing more expensive. Those higher rates could discourage consumers and businesses from spending, hiring and investing and could eventually push the economy into a recession.

(Source: AP News)

UK Retail Sales Flat In Feb After Jan Fall, Outlook Gloomy: CBI   Published: 24 February 2023

 

  • British retail sales held steady in February after falling in January but stores expect sales volumes to slip again in March as the rising cost of living eats away at disposable incomes.
  • The Confederation of British Industry's (CBI) distributive trades index rose to +2 this month from -23 in January. A Reuters poll of economists had pointed to a reading of -13. But a measure of expected sales in the month ahead fell to -18 from -15. Official data published last week showed shoppers spent more than expected in January but inflation-hit households were buying fewer items and relying more on discounts.
  • Gabriella Dickens, an economist at Pantheon Macroeconomics, said the recovery in the CBI's sales measure this month would "likely prove a false dawn" as households are expected to spend less in the coming months as the risk of a recession looms.
  • Its average selling price balance fell two percentage points to a still historically high +80 in the three months to February from +82 in the three months to the end of November. The Bank of England has signalled that it believes the tide is turning on Britain's inflation.
  • Consumer price inflation eased to 10.1% last month after hitting a 41-year high of 11.1% in October. Economists polled by Reuters this month expect inflation to average 7.0% this year, and 2.6% in 2024.

(Source: Reuters)

Bank of Jamaica Maintains the Policy Rate at 7%   Published: 23 February 2023

  • At its meeting on 16 and 17 February 2023, the Monetary Policy Committee (MPC) opted to maintain the policy interest rate at 7.0% and continue to maintain relative stability in the foreign exchange market. Jamaica’s inflation rate of 8.1% in January 2023 was below the rate of 9.4% at December 2022. Core inflation (which excludes food and fuel prices from the CPI) also decelerated to 7.1% at January 2023 from 8.5% at December 2022.
  • The key external drivers of headline inflation, such as grains, fuel and shipping prices, continued to decline and the forecasts for these variables have been lowered. Consistent with global consensus forecasts for a fall in commodity prices and the Bank’s overall monetary policy stance, and in the absence of any new shocks, inflation is projected to continue to decelerate in 2023.
  • This forecast envisages that annual inflation will fall within the Bank’s inflation target range of 4.0 to 6.0 per cent by the December 2023 quarter and remain generally at that level over the medium term. However, the near-term risks to the inflation outlook are elevated and skewed to the upside.
  • While interest rates in the money and capital markets have generally increased in line with the policy rate, some deposit-taking institutions (DTIs) have, so far, made only marginal adjustments to their deposit and lending rates. With that said, the MPC decided to increase by one percentage point (pp) the domestic and the foreign currency Cash Reserve Requirements (CRRs) applicable to deposit-taking institutions (DTIs), effective 01 April 2023. This decision represents a part of the central bank’s efforts aimed at underpinning the return of inflation to its target range. Currently, DTIs are required to hold a minimum of 5.0% of their Jamaican dollar-denominated prescribed liabilities and 13.0% of their foreign currency-denominated prescribed liabilities as cash reserves at the central bank.
  • The MPC reiterated that in the absence of new shocks, future monetary policy decisions aimed at returning inflation to the Bank’s target range, including further adjustments to the cash reserve requirement, will depend on the state of liquidity in the financial system and the continued pass-through effect of monetary policy on deposit and loan rates. The decisions will also depend on the MPC seeing more pass-through of international commodity price reductions to domestic prices and on the Fed continuing to slow its policy rate increases. The date of the next policy rate decision announcement is 29 March 2023.

(Source: BOJ)

Revenues, Profit Up for Fontana in H1   Published: 23 February 2023

 

  • Fontana Limited recorded a net profit of $323.81Mn for the second quarter that ended December 31, 2022, representing a 30.1% yoy increase in profitability. Consequently, the company’s bottom line for the six months increased by 32.7% to $411.39Mn when compared to the same period in 2021.
  • Revenues for the quarter were up by 15.1% yoy to a record-breaking $2.14Bn. Revenues for the six-month were $3.78Bn, representing a 19.5% increase when compared to the corresponding period of 2021. This was largely due to the increase in demand and expanded product offerings.
  • Operating expenses were 29.9% higher ending the review period at $954.75Mn, driven by an increase in staff costs.
  • Fontana’s stock price has decreased by 1.13% since the start of the calendar year. The stock closed Tuesday’s trading session at $8.83 and currently trades at a P/E of 15.5x which is below the Junior Market Distribution Sector Average of 17.2x.
  • As part of its expansion plans, the company anticipates opening its Portmore store in the summer of 2023. The store is also expected to generate more revenue than the cost of developing the store within months given the strategic location and the growing population of the municipality.

 (Sources: JSE & NCBCM Research)

Central American Remittance Growth Remains Strong Published: 23 February 2023

  • Remittance data from across the Central American sub-region continues to show inflows far above historical levels, providing a key source of support for domestic private consumption.
  • The bulk of these flows come from the US, where the strength of the labour market has increased the income available to send abroad. This trend first began in mid-2020, when the huge fiscal stimulus (roughly USD5.0trn) passed by the US in response to the Covid-19 pandemic boosted household incomes, even despite the collapse in employment during the period of intense lockdowns.
  • This has continued into H222 and through Q322, the latest period for which data is available from all the markets that report remittances, receipts are up 18.2% y-o-y, and 60.3% from the same period in 2019.
  • However, Fitch expects that remittance growth has peaked, as the US economy is likely to slow in 2023, hurting the labour market (the company forecasts unemployment to rise from 3.4% to 4.5% by the end-2023) and reducing the disposable income available to remit back to Central America.
  • In 2023, the reduction in remittance inflow is a key factor that will impact real GDP growth in Central America with growth anticipated to slow from an estimated 4.3% in 2022 to 2.8% in 2023.

(Source: Fitch Solutions

Colombia Gov't To Boost 2023 Budget By $4.7Bn, Minister Says Published: 23 February 2023

  • Colombia's government is expected to hike its 2023 budget by some 23 trillion Colombian pesos (US$4.71Bn) in a proposal to be sent to Congress on February 17, 2023, the country's interior minister said last Thursday.
  • Almost all of the additional funds will come from a recently passed tax reform Interior Minister Alfonso Prada said in a radio interview.
  • Notably, the approved tax reform approved back in November 2022, will raise an additional 20 trillion pesos (US$4 billion) annually for the next four years. The reform increases duties on oil and coal, raises income taxes on the rich, and targets single-use plastics and processed food and drinks.
  • The funds will be aimed at backing President Gustavo Petro’s wide-ranging social programmes, specifically purchasing land for planned agrarian reforms. In addition to pending health reform, Petro also hopes to change the country's labour and pension systems, and offer free university education to low-income students.
  • These programs will be pushed because more than half of Colombia's population currently lives in poverty, according to government data. These proposals are therefore intended to not only meet fiscal codes and reduce public debt but also aimed at targeting the social disparities in the country.

(Source: Reuters)

Canada's inflation slows in January, making rate pause more likely   Published: 23 February 2023

 

  • Canada's annual inflation rate eased more than expected in January to 5.9%, data showed on Tuesday, which should allow the Bank of Canada to keep interest rates steady at its next meeting while it lets previous rate hikes sink in.
  • Analysts had expected inflation to edge down to 6.1% from 6.3% in December. Month over month, the consumer price index rose 0.5%, Statistics Canada said, again lower than analysts' forecast of a 0.7% gain, after a 0.6% decline in December.
  • Statscan cited a base effect, or comparison with last year's strong result, that should persist through June. In January 2022, prices surged at a time of Russia-Ukraine tensions and supply chain disruptions, and they increased to a peak of 8.1% in June.
  • The inflation figure "allows (the Bank of Canada) to stay on hold in March, despite the fact that the labor market was extraordinarily hot in the month of January," said Andrew Kelvin, chief Canada strategist at TD Securities.
  • The Bank of Canada in January raised its benchmark interest rate to a 15-year high of 4.5% and became the first major central bank to say it would hold off on further increases as long as prices eased in line with its forecast.

(Source: Reuters)

Oil rises 1% on China demand hopes and supply concerns   Published: 23 February 2023

 

  • Oil prices rose over 1% on Monday, buoyed by optimism over Chinese demand, continued production curbs by major producers and Russia's plans to rein in supply.
  • Brent crude settled up $1.07, or 1.3%, at $84.07 a barrel. U.S. West Texas Intermediate crude (WTI) for March, which expires on Tuesday, last rose 85 cents, or 1.1%, at $77.19. Volumes were muted on Monday because of a U.S. market holiday for Presidents' Day. Both crude benchmarks settled $2 lower on Friday for a decline of about 4% over the week after the United States reported higher crude and gasoline inventories.
  • Analysts expect China's oil imports to hit a record high in 2023 to meet increased demand for transportation fuel and as new refineries come on stream. "The optimism around China today may be responsible for the gains we're seeing in crude, which would make a lot of sense given it's the world's largest importer and expected to recover strongly from the COVID transition," said Craig Erlam, senior markets analyst at OANDA in London.
  • China and India have become major buyers of Russian crude amid Western sanctions on Russian oil and more recently, embargoes and price caps because of the Ukraine war. Russia plans to cut oil production by 500,000 barrels per day (bpd), equating to about 5% of its output, in March after the West imposed price caps on Russian oil and oil products.
  • Future oil supply shortages are likely to drive prices toward $100 a barrel by the end of the year, Goldman Sachs analysts said in a Feb. 19 note. Prices will move higher "as the market pivots back to the deficit with underinvestment, shale constraints, and OPEC discipline ensuring supply does not meet demand", they wrote.

(Source: Reuters)

Q1 Profit Increased by 52.3% at Honey Bun   Published: 17 February 2023

 

  • Honey Bun Limited recorded a 52.3% year-over-year increase in its net profit to $68.29Mn for the first quarter ended December 31, 2022 relative to the corresponding period of 2021.
  • Operating revenue for the quarter was up by 23.0% yoy to $817.40Mn. Gross profit for the quarter grew by 35.2% to $357.64Mn and consequently, the gross profit margin improved to 43.8% from 39.8%. This was attributable to management’s focus on islandwide distribution and efficiency. The company opened its Old Harbour outlet in Q1, bringing the total wholesale outlets across the island to nine (9).
  • As a hedge against the negative impact of current and future supply chain disruptions, inventory increased by 78.4% to close at $217.67Mn and payables increased by 30% to close at $250.95Mn in Dec 2022. The revenue growth also contributed to the increase in receivables of 64% to $198.5Mn.
  • HoneyBun’s stock price has decreased by 7.60% since the start of the calendar year. The stock closed Thursday’s trading session at $7.38 and currently trades at a P/E of 15.4x, which is below the Junior Market Manufacturing Sector Average of 36.4x.
  • Further growth is anticipated for the financial year, and to that end, additional outlets are being planned country-wide, along with adding more vehicles to its fleet as it builds out its distribution plans. Additionally, the company plans to increase exports, improve efficiency and further automate production, thereby boosting profitability. 

(Source: JSE)

Oil-Rich Guyana Expects Annual Economic Growth Of Over 25% In Coming Years Published: 17 February 2023

  • Guyana's government is forecasting the nascent oil producer's economy, which has recently been among the world's fastest-growing, will expand by at least 25% per year in the next three to four years with a favourable outlook, according to Finance Minister Ashni Singh.
  • Since oil production was inaugurated in 2019 by a consortium led by U.S. major Exxon Mobil Corp, Guyana's economy has boomed and the government has proposed devoting an increasing portion of its budget to infrastructure projects.
  • According to the public budget, the government's National Resource Fund will receive $1.6Bn in deposits this year, while withdrawals for funding the country's capital expenditures will be around $1Bn. By the end of 2026, the fund is expected to have increased its balance to $5.4Bn.
  • Guyana's economy registered a real growth of 62% last year and has been forecasted to expand by another 25% this year. Revenue from oil exports and royalties is expected to climb 31% to $1.63Bn this year, fueled by an average $83 per barrel price for Guyana's export basket.

(Source: Reuters)