• U.S. retail sales unexpectedly increased by 0.3% in November, signalling a robust start to the holiday shopping season. Following a 0.2% decline in October, this growth is attributed to deep discounting by retailers.
• The rebound in retail sales underscores consumers' resilience, supported by a strong labour market. This positive trend challenges market expectations of an early rate cut by the Federal Reserve, which recently signalled the end of its two-year tightening of monetary policy. This same resilience provides a foundation for the Fed to achieve a soft landing but shows the Fed will likely not cut rates in early 2024.
• Online retail sales rebounded by 1.0%, reflecting a shift away from traditional brick-and-mortar stores. Various sectors experienced growth, such as motor vehicles and parts dealers (0.5%), furniture stores (0.9%), and food services and drinking places (1.6%). However, electronics and appliance outlets saw a decline of 1.1%.
• The stable labour market, evidenced by a drop in initial claims for state unemployment benefits, contributes to economists' expectations of decent fourth-quarter consumer spending and a potential GDP growth rate of 2.75%. Despite concerns about rising unemployment rolls, economists dismiss them as reflecting difficulties in adjusting for seasonal fluctuations.

(Source: Reuters)

• The European Central Bank (ECB) affirmed its commitment to maintaining record-high interest rates despite lower inflation expectations. The central bank, focused on combating a severe inflationary period, emphasised that borrowing costs would stay unchanged.
• ECB President Christine Lagarde's stance contrasted with the more dovish tone of her U.S. Federal Reserve counterpart, Jerome Powell. Lagarde stressed that inflation would rebound soon, and the ECB had no discussions about rate cuts. This differed from Powell's signal of potential interest rate reductions.
• The ECB announced plans to phase out its last remaining bond-buying scheme, a measure introduced during the COVID-19 pandemic. This move is viewed as a smaller policy change, not indicating a shift to a more dovish stance like the U.S. Federal Reserve.
• The ECB's updated economic projections revealed lower growth and inflation expectations for the coming years. ECB staff expect headline inflation to average 5.4% in 2023, 2.7% in 2024, 2.1% in 2025 and 1.9% in 2026, closing in on the bank's 2% target.
• Lagarde hinted at the possibility of data-rich months in the first half of the next year, implying that any rate cut might not occur before June or July. This came on the back of lower-than-expected inflation reading for November and comments from ECB board member Isabel Schnabel that were perceived as dovish.
• A sharp fall in bond yields since then has eased borrowing costs, undoing the ECB's tightening and potentially helping fuel inflation. Traders adjusted their expectations slightly, with rate cuts now anticipated in April, and the ECB's deposit rate remains at a record-high of 4%.

(Source: Reuters)

• The Bank of Jamaica has given an update on the progress of implementing the twin-peaks model, which was announced earlier this year.
• The supervisory model for the financial sector is to be implemented by the end of the 2024/25 fiscal year. 
• Senior Deputy Governor of the BOJ, Dr. Wayne Robinson, says the structure of the new model and how it will be funded is still being contemplated.
• Under the regime, the Financial Services Commission will be responsible for consumer protection and market conduct oversight, while the BOJ will manage matters of financial stability and prudential affairs.

 (Source:  RJR News)

• The Ministry of Tourism estimates that Jamaica should record 4,122,100 visitor arrivals from January to December 2023. Portfolio Minister, Hon. Edmund Bartlett said this would represent a 23.7% increase over the 2022 figure.
• Of this number, 2,875,549 are expected to be stopover visitors, representing a 16% increase over the number recorded last year.
• Additionally, Minister. Bartlett expects to end the year with 1,246,551 cruise passengers, representing a 46.1% increase over the tally for 2022.
• A breakdown of these estimated revenues, specifically including direct inflows to the government’s coffers, are Tourism Enhancement Fund (TEF) fees, which go to the Consolidated Fund, US$57.5Mn or J$8.9bn.
• There is also the Departure Tax of US$100.6Mn or J$15.6Bn; Airport Improvement Fees – US$28.8Mn or J$4.47Bn; Airline Passenger Levy – US$57.5Mn or J$8.9Bn; Passenger Fees and Charges – US$69Mn or J$10.7Bn; and the Guest Accommodation Room Tax (GART) – US$22.6Mn or J$3.5Mn.
• The influx of visitors is expected to generate US$4.3Bn in tourism earnings for 2023, representing a projected increase of 17.8% over total inflows for 2022 and a 17.2% spike over the out-turn for the pre-pandemic year of 2019.

(Source:  JIS)

• President Luis Abinader emphasised the critical role of foreign investment in the economic development of the Dominican Republic.
• Abinader highlighted the nation’s political stability and structural reforms as key attractions for investors. Tax incentives, streamlined bureaucratic processes, and legal certainty are among the measures implemented to create a favourable investment climate. He also stressed the importance of collaboration between the government, private sector, and international community for sustainable economic growth.
• The President identified tourism, renewable energy, agribusiness, and technology as key sectors for future investment. These remarks underscore the Dominican government’s commitment to fostering an environment conducive to investment and growth.
• The Dominican Republic attracted about US$4Bn in foreign direct investments (FDI) in 2022 and is positioned as a leader in Central America and the Caribbean and a prominent investment destination in Latin America.
• According to research, the country hosts 659 significant foreign investment companies, contributing 18.8% to the Social Security Treasury. FDI’s fiscal contribution has increased by 84% in dollars between 2018 and 2022, and the country projects to raise approximately US$4.3 billion in FDI this year.

(Source: Dominican Today)

• According to Moody’s, Non-financial industry companies in Latin America are facing a negative outlook for next year because of continued high interest rates, slow regional economic growth, and projected low prices for commodities because of a deceleration in China.
• The rating agency said that though credit conditions for Latin American companies will be better in 2024 than during this year, uneven growth and still-high debt costs will affect spending, investment, and employment.
• "Strict financial conditions will continue until the market uncertainty in regards to the path of U.S. rates dissipates, which will limit financing options, especially for the more than two-thirds of corporate issuers who have a speculative grade," Moody's said in a report.
• Furthermore, the El Nino climate phenomenon will last until at least mid-2024 and contribute to price instability for agricultural, metallurgical, and mining raw materials and operative disruptions in much of the region.
• Of note, it is expected that Mexico will benefit from nearshoring efforts and higher activity in the automotive, real estate, and communications sectors; however, the mining industry is at risk of government intervention, Moody's said.

 (Source: Reuters)

• After raising the policy rate by 5.25 percentage points since March of 2022, the central bank placed the policy rate on hold since July as inflation edges closer to its target. Simultaneously, the Fed signaled in new economic projections that the historic tightening of U.S. monetary policy engineered over the last two years is at an end, and lower borrowing costs are coming in 2024.
• In a new policy statement, U.S. central bank officials took explicit account of the fact that inflation "has eased over the past year," and said they would watch the economy to see if "any" additional rate hikes are needed. Implying directly that, after months of aggressive tightening and a bias towards moving rates higher, they may not need to raise them again.
• Powell also flagged the uncertainty of the outlook and said he couldn't definitively rule out higher rates at this point, even as officials looked toward a lower policy rate. He noted, "While we believe our policy rate is at or near its peak for the tightening cycle, the economy has surprised forecasters,"
• Considering the unpredictable nature of the economy, he said that while Fed officials "do not view it as likely to be appropriate to raise interest rates further, neither do they want to take the possibility off the table" if it's needed.
• However, Powell emphasised that the central bank believes it has done enough in terms of rate hikes. While Fed policymakers did not want to take another rate hike off the table, it is no longer the central bank's "base case". Therefore, while officials remain free to raise the Fed's benchmark overnight interest rate again in the coming months if inflation resurges, that seems increasingly unlikely given the recent performance of inflation that has edged steadily towards the central bank's target.
• The economic projections, as a whole, cling closely to the "soft landing" scenario that has become the base case for U.S. central bankers hoping that inflation continues to slow without a recession and sharp rise in unemployment.

 (Source: Reuters)

• US. producer prices remained unchanged in November, defying expectations of a 0.1% increase. This was attributed to cheaper energy goods, with services prices also holding flat for a second consecutive month.
• The report from the Labour Department has boosted optimism that overall inflation will continue to subside. This is seen as a positive development, potentially allowing the Federal Reserve to consider interest rate cuts in the coming year. The Federal Reserve signalled a shift in its economic projections, indicating the end of a historic tightening of monetary policy.
• Goods prices were stable, with a decline in energy product costs offset by a rebound in food prices. Notably, avian flu-related issues impacted egg prices. Energy costs were pulled down by lower gasoline prices. Excluding food and energy, core goods prices rose modestly, raising concerns about potential goods deflation.
• The cost of services, a key driver of inflation, was unchanged, with lower transportation and warehousing costs. However, wholesale prices for hotel and motel rooms rose.
• Despite ongoing inflation above the Fed's 2% target, markets are anticipating a potential rate cut in May. Analysts suggest that while consumer spending continues to fuel inflation, a downward trend in service providers' costs may stabilize inflation if consumer demand cools.

(Source: Reuters)

• Scotia Group Jamaica Limited recorded a net profit attributable to shareholders of $17.23Bn for its financial year ended October 30, 2023, representing a 66.9% YoY increase in profitability. This was driven by strong performance in all its business lines as well as the efficient management of its operations.
• Total revenues, excluding expected credit losses for the year ended October 31, 2023, grew by $12.33Bn to $55.46Bn, reflecting an increase of 28.6% over the previous year. This was primarily driven by an increase in net interest income of $8.8Bn stemming from the strong growth in its loan portfolio, higher insurance revenue, higher gains on foreign currency activities, and higher fee and commission income earned, given the significant increase in transaction volumes.
• Operating expenses continue to be anchored by the Group’s expense management initiatives and totaled $27.63Bn for the year ended October 2023, an increase of $2.9Bn or 11.8% driven by higher technical support fees arising from the higher transaction volumes.
• Expected credit losses for the period showed a reduction of $661.54Mn or 21.6% compared to full year 2022. The Group’s credit quality remains strong and the company is well provisioned for both its performing and non-performing loans, ensuring adequate coverage for possible future non-performing loans.
• SGJ's stock price has increased by 0.9% since the start of the calendar year. The stock closed Tuesday’s trading session at $34.53 and currently trades at a P/E of 6.2x which is below the Main Market Financial Sector Average of 11.9x.
• As part of its strategic move to target more businesses in the middle to upper-income band, the company recently partnered with American Express to issue Jamaica’s first metal AmEx platinum card. This partnership augurs well for the company as the embedded benefit may increase card usage, allowing more revenues to be generated from credit card interest and merchant fees.

 (Source:  JSE)

• The Government’s prior year performance gives confidence that it remains on track to eliminate the fiscal deficit even if 2023-2024 “slides” from its original targets, a governance reformer said last night.
• Hubert Edwards, the Organisation for Responsible Governance’s (ORG) economic development committee head, told Tribune Business that while reaching a fiscal surplus “may take a bit longer” than the Government’s 2024-2025 goal this would not be “fatal” for its plans or The Bahamas generally.
• Additionally, with the International Monetary Fund (IMF) projecting that the Government will run a near-$379m deficit for the 2023-2024 fiscal year, he argued the Davis administration’s first goal “almost instantly becomes” beating that benchmark.
• Mr Edwards told this newspaper that while the Government’s $131.1Mn deficit target for the year is “aggressive”, given that this number is just one-third of the IMF’s forecast, there is likely “some wiggle room” provided the ultimate 2023-2024 outcome moves in the right direction.
• “There’s enough for us to be confident, even if 2023-2024 slides a bit further than expected, we will still be on target to eliminate the deficit and move into a surplus,” Mr Edwards told Tribune Business. “That may take a little bit longer, but I don’t think it’s a fatal circumstance.”
• The Government is projecting that it will achieve a $109Mn surplus, where its revenues exceed spending, in the 2024-2025 fiscal year. However, the IMF is still forecasting that The Bahamas will incur a deficit equal to 2% of gross domestic product (GDP) or nearly $290Mn that year, so it remains to be seen who is right.

(Source: The Tribune)