• At its board meeting on March 30, BanRep of Colombia raised its policy interest rate by 25 basis points to 13.00%, which was in line with Fitch's and general expectations.
• The vote was unanimous among all seven board members. The preliminary press release from the meeting cited easing food and drinks price inflation (24.1%) y-o-y in February compared to 27.8% in December 2022, as well as improving inflation expectations among economic analysts surveyed by BanRep as the reason for the more moderate rate hike, despite accelerating core inflation.
• Additionally, BanRep Governor Leonardo Villar stated that he expects the global banking crisis will have a limited effect, if any at all, on the Colombian economy.
• Given these reasons, Fitch Solutions expects that BanRep will begin to loosen policy in H223 in an effort to support growth once more evidence emerges that inflation has peaked, with the rate ending 2023 at 12.25%.
• However, risks to Fitch’s interest rate forecast are skewed more to the downside, with lower-than-expected growth posing the most significant downside risk. If economic headwinds cause Colombian GDP growth to underperform, this would not only likely cause inflation to subside faster than expected but would also pressure BanRep to cut rates in the latter half of the year in order to support economic growth.

(Source: Fitch Solutions)

• Oil prices were little changed in choppy trading on Tuesday as investors weighed OPEC+ planned production cuts against weak U.S. and Chinese economic data that could suggest cooling oil demand.
• Brent crude and WTI had jumped by more than 6% on Monday after the Organization of the Petroleum Exporting Countries and allies, including Russia, collectively known as OPEC+, rocked markets with an announcement of voluntary production cuts of 1.66 million barrels per day (bpd) from May until the end of 2023.
• U.S. job openings in February fell to the lowest level in nearly two years, and a slump in U.S. manufacturing activity in March raised concerns about oil demand. Weak manufacturing activity in China last month also added to the woes.
• Stock markets declined on the weaker economic data, while gold crossed the key $2,000 level as investors rushed to buy the safe haven asset. The economic signals ran alongside fears of an inflationary hit to the world economy, as rising oil prices fuel higher interest rates.
• OPEC+'s latest output targets bring the total volume of cuts by OPEC+ to 3.66 million bpd, including a 2 million-barrel cut last October, equal to about 3.7% of global demand.
• The production curbs led many analysts to raise their Brent oil price forecasts to around $100 per barrel by year-end. Goldman Sachs lifted its forecast for Brent to $95 a barrel by the end of 2023 and to $100 for 2024.
• Market watchers have been trying to gauge how much longer the U.S. Federal Reserve Bank may need to keep raising rates to cool inflation and whether the U.S. economy may be headed for a recession. Investors now see about a 40% chance the Fed will hike rates by a quarter basis point in May, with a roughly 60% chance of a pause.

(Source: Reuters)

• A risk-on mood fueling this year’s equities rally is likely to falter, with headwinds from bank turbulence, an oil shock, and slowing growth poised to send stocks back toward their 2022 lows, according to JPMorgan strategist Marko Kolanovic.
• “The Fed indicated no intention to cut interest rates this year, yet risk assets are exhibiting an unprecedented rally, with European stocks trading near all-time highs and US stocks recovering recent losses,” Marko Kolanovic, JPMorgan strategist, wrote in a note to clients Monday. “We expect a reversal in risk sentiment and the market retesting last year’s low over the coming months.”
• A drop in the VIX (Volatility Index) below 20, a level associated with less stressful periods, suggests investors believe the banking crisis is contained in the near term. However, Kolanovic characterizes the present market backdrop as “the calm before the storm.”
• One of Wall Streets biggest optimists through most of the market selloff last year, Kolanovic has since reversed his view, cutting his equity allocation in mid-December, January, and March due to a soft economic outlook this year.
• Stocks have remained resilient this year despite rising interest rates that have dented corporate profits, slowed growth, and triggered a series of bank collapses in the US and overseas. The benchmark S&P 500 rose 7% in the first quarter after dropping nearly 20% in 2022, while gains across technology stocks have pushed the Nasdaq 100 up 20% since the start of January and into a bull market.
• “It is worth noting the accordion-like nature of risk sentiment, where restrictive rates produced an issue for various carry trades, and the ensuing pullback in yields mitigated some of the stress,” Kolanovic wrote. “Although central banks are still communicating, there is ground to cover on fighting inflation and pushing back against the market’s assumption of cuts, so the original source of stress, rates higher for longer, can reenter the picture.”

(Source: Bloomberg)

• During the fourth quarter of 2022, the Jamaican economy grew by 3.8% relative to the fourth quarter of 2021. This resulted from growth in the Services and Goods Producing Industries of 3.6% and 4.7%, respectively, reflecting the continued recovery of the economy from the adverse effects of the COVID-19 pandemic.
• All industries within the Services Industries grew, except for the Producers of Government Services which fell by 0.8%. The top performers were Hotels & Restaurants (21.6%), Other Services (10.4%), and Transport, Storage & Communication (5.9%). The removal of COVID-19 restrictions significantly benefitted the services industries as the growth in Hotels & Restaurants was mainly influenced by a 36.5% increase in foreign national arrivals during the period.
• The increase in the Goods Producing Industries was largely due to higher output levels in Agriculture, Forestry & Fishing (5.9%), Manufacturing (5.4%), and Mining & Quarrying (99.0%). However, value added for the Construction industry declined by 4.8%. The Agriculture, Forestry & Fishing industries benefitted from favourable weather conditions while the resumption of operations at the JAMALCO plant impacted the performance of the Mining & Quarrying industry.
• Preliminary estimates from the PIOJ indicated that the Jamaican economy grew by 5.2% in the calendar year 2022. For FY2023/24 growth is projected to be between 1.0%–3.0% largely reflecting a faster-than-expected pace of recovery in the previous fiscal year leading to an earlier-than-anticipated normalisation of output and a return to the long-term trend of growth.

(Sources: STATIN & PIOJ)

• An additional US$70Mn of investment has been earmarked for the upgrading and modernisation of the Sangster International Airport (SIA) in Montego Bay, St. James. Prime Minister, the Most Hon. Andrew Holness, made the announcement after touring the ongoing runway extension and civil infrastructure project, being undertaken at the airport at a cost of US$70Mn.
• The Sangster International Airport runway extension project is slated for completion during the second quarter of 2023. The work entails extending the strip from 2,662 to 3,060 metres.
• “This is what I would call a strategic nation-building investment. This US$140Mn in total will transform the experience here. It will make Jamaica more attractive and make Jamaica more competitive with other countries in the region, which have also invested heavily in improving their infrastructure,” he said.
• Mr. Holness told journalists that the airport’s current physical infrastructure and mechanisms are “outdated”. As such, he said this “great investment” in the airport is intended to update the facilities and improve the capacity of its services for locals and foreigners.
• Approximately 70% of visitors to Jamaica come through the Sangster International Airport. That said these new and existing investments in the airport bode well for Jamaica’s tourism product as it will open up the country to other destinations, thereby increasing the prospect of more visitors and foreign earnings for the local economy.
• Mr. Holness indicated that additional investments are being made in advancing the technology platform for the immigration process where, soon, it will be a paperless system for a seamless experience, travelling through the airport.

(Source: JIS News)

• The Mexican economy could grow up to 3.0% both this year and next, boosted by increased manufacturing investment and cooling inflation, according to a copy of the government's latest budget forecasts.
• The Ministry estimates Latin America's second-biggest economy will expand between 2.2% and 3.0% this year, and between 1.6% and 3.0% in 2024, the document showed, as the country continues to claw back pandemic-led losses.
• For 2023, the "lower end of the range was adjusted upwards due to the good performance of the domestic economy," said the document containing preliminary forecasts for next year. Additionally, Mexico's inflation rate by the end of this year is seen slowing to 5.0%, and then to 4.0% by the end of 2024.
• As inflation climbed worldwide, central banks rushed to hike interest rates and slow the trend. Mexico's central bank raised rates 25 basis points to 11.25% last Thursday but hinted the hiking cycle could be nearing its end.
• Notably, Mexico is also primed to benefit from private investment fueled by "nearshoring," the trend of moving production to North America and away from Asia, the ministry said. Nearshoring could add up to 1.2 percentage points to GDP the ministry said, without specifying a time frame.
• In particular, the ministry anticipated a boost to foreign investment in manufacturing and said the automotive industry was a "natural candidate" to take advantage of nearshoring. Electric vehicle maker Tesla recently announced it would build a "gigafactory" in the northern border state of Nuevo Leon, which local officials have said could bring in up to $10Bn in investment and create 10,000 jobs.

(Source: Reuters)

• Fitch Solutions is expecting social stability in Trinidad and Tobago (T&T) to worsen in 2023, as inflation rises and crime rates surge. While T&T’s outlook on social stability is not the worst by regional standards, it will be facing headwinds in 2023.
• The government’s commitment to fiscal consolidation has led it to remove subsidies on key goods. These subsidies on food and fuel were in place since commodity and food prices spiked in early 2022.
• Consequently, inflation has risen dramatically, and if price pressures persist through 2023, ‘cost of living’ protests may become more commonplace in the country. Additionally, the government has not been successful in tapering the sharp rise in crime, seen since the end of the pandemic, which negatively affects Fitch’s ‘security’ component in its Short-Term Political Risk Index (STPRI).
• Given these reasons, Fitch Solutions have revised its STPRI score for Trinidad & Tobago from 65.0 to 64.3 out of 100.
• Despite a higher risk of protests, broad policy continuity is expected from Dr Keith Rowley’s government, as his People’s National Movement retains a comfortable majority in parliament until 2025.

(Source: Fitch Solutions)

• Global factory activity weakened in March as consumers feeling the pinch from rising living costs cut back, surveys showed on Monday, suggesting a deteriorating outlook will remain a drag on economic recoveries and keep policymakers on their toes.
• S. manufacturing activity slumped to the lowest level in nearly three years as new orders continued to contract, a survey by the Institute for Supply Management (ISM) showed. Its manufacturing PMI fell to 46.3 last month, the lowest reading since May 2020, from 47.7 in February. Economists polled by Reuters had forecast the index dipping to 47.5.
• It was the fifth straight month that the PMI remained below the 50 threshold, which indicates a contraction in manufacturing. However, so-called hard data have suggested that manufacturing, which accounts for 11.3% of the economy, continues to grow moderately.
• Rising borrowing costs as the Federal Reserve fights high inflation have cooled demand for goods, which are typically bought on credit. Demand could also come under further pressure following the recent failure of two U.S. regional banks and the takeover of Credit Suisse, which stressed the financial sector.
• "While an onshoring of supply networks and investment in domestic manufacturing capacity could provide support to factory activity, a further tightening in credit conditions may be a hurdle going forward," said Rubeela Farooqi, chief U.S. economist at High Frequency Economics.

(Source: Reuters)

• An inflation gauge the Federal Reserve follows closely rose slightly less than anticipated in February, providing some hope that interest rate hikes are helping ease price increases.
• The personal consumption expenditures price index excluding food and energy increased 0.3% for the month, the Commerce Department reported Friday. That was below the 0.4% Dow Jones estimate and lower than the 0.5% January increase.
• On a 12-month basis, core PCE increased 4.6%, a slight deceleration from 4.7% in January. Including food and energy, headline PCE rose 0.3% monthly and 5% annually, compared with 0.6% and 5.3% in January. The softer-than-expected data came with monthly energy prices decreasing 0.4% while food prices rose 0.2%. Goods prices climbed 0.2% while services increased 0.3%.
• “The inflation trend looks promising for investors. Inflation will likely be below 4% by the end of the year, giving the Federal Reserve some leeway to cut rates by the end of the year if the economy falls into recession,” said Jeffrey Roach, chief economist at LPL Financial.

(Source: CNBC)

• For February 2023, output prices for producers in the Mining and Quarrying industry decreased negligibly, while for the Manufacturing industry, prices increased by 0.4% as indicated by the Statistical Institute of Jamaica (STATIN).
• The decline in the Mining and Quarrying industry index was mainly attributed to negligible decreases in the index for the major groups ‘Bauxite Mining & Alumina Processing’ and ‘Other Mining & Quarrying’. This is due primarily to a slight appreciation of the Jamaican dollar against the USD in February.
• An increase of 0.3% in the index for the highest weighted major group ‘Food Beverages & Tobacco’ contributed to the increase in the index for the Manufacturing industry. Other contributing major groups were, ‘Other Manufacturing n.e.c.’ 9.9% and ‘Refined Petroleum Products’ 0.3%.
• For the period February 2022 – February 2023, the Mining & Quarrying industry’s index fell by 14.7% while the point-to-point movement for the Manufacturing industry’s index increased by 6.6%. The fall in Mining & Quarrying industry’s index was a result of a 15.3% decline in the index group ‘Bauxite Mining & Alumina Processing’ as the price of Bauxite & Alumina on the international market declined. However, the movement in the Manufacturing Industry was primarily attributed to a 9.7% increase in the index for the major group ‘Food, Beverages & Tobacco but was tempered by a 3.1% decline in the index for the major group ‘Refined Petroleum Products’. The manufacturing industry is now reaping the benefits of falling prices after contending with increased prices for major inputs during the review period given the Russia-Ukraine war amongst other things.
• The PPI, which measures the average change over time in selling prices received by domestic producers of goods and services, has trended down over the second half of 2022. Despite a slight increase in the index in February, the fall in freight charges and fuel prices is expected to result in lower costs for local producers going forward and could translate into lower prices for consumers.

(Source: STATIN)