Jamaican$ slips on increased inflows – Tuesday

The rate the public bought the US dollar at, rose on Tuesday to JS$131.18 from J$131.09 on Monday, as dealers sold US$36.32 million compared to US$38.44 million on Monday.
Dealers bought US$51.92 million in US currency, at an average of J$130.27 versus J$129.82 on Monday when they purchased US$43.67 million.
On Tuesday, dealers purchased the equivalent of US$56.56 million in all currencies, up from US$46.95 million and sold US$37.94 million versus US$40.62 million on Monday.
The selling rate for the Canadian dollar rose to J$108.04 from J$106.17, at the close on Monday while the British Pound was more costly, with J$175.99 buying the British currency versus J$173.48 previously and the euro, fell in value against the Jamaican dollar, with it taking J$157.24 to buy the European common currency, versus J$159.32 previously.

Inflation eases again in August

The rate that consumer prices rose by, moderated further in “August with an increase in the inflation rate of 0.3 percent,” according to the Statistical Institute of Jamaica (STATIN), coming down from 0.6 percent in July and 0.7 percent in June.
“The rate of inflation for the calendar year-to-date was 3 percent,” Statin stated. Inflation rate over the last twelve months is up 4.4 percent and the fiscal year-to-date 2 percent.
Prices for Recreation and Culture rose 1.3 percent in August” and was “due to mainly to increased prices for books and other school equipment,” Statin said. Higher prices for produce such as cabbage, potato and yam, pushed the index for Food and Non-Alcoholic Beverages by 0.6 percent, the report stated.

Prices of food increased in August.

Other divisions that recorded increases in prices are: Alcoholic Beverages and Tobacco at 0.4 percent, Clothing and Footwear at 0.2 percent, Furnishings, Household Equipment and Routine Household Maintenance at 0.1 per cent, Health at 0.2 per cent, Restaurants and Accommodation Services at 0.1 percent, Miscellaneous Goods and Services at 0.1 percent. There were no movement for the divisions Communication, Education and Transport.

Huge surge in NIR mostly temporary

Jamaica’s international reserves surged to $4.25 billion at the end of August, with net reserves climbing to $3.67 billion, up from a net of US$2.74 billion at the end of July.
The increase came from a number of sources with the inflows from the issue of bonds by the Government of Jamaica (GOJ) as well as inflows from the foreign exchange market.
“The increase in the NIR of US$933 million in August 2017 was attributed mainly to receipts from Eurobond of US$834.4 million by GOJ, net purchases of foreign exchange by BOJ from authorised foreign exchange traders and issuance of BOJ USD CDs,” Bank of Jamaica confirmed in response to an IC Insider.com’s query.
“Notably, the impact of the large inflow from the GOJ Eurobond is transitory. During September, GOJ will pay approximately US$530 million (principal and interest) to investors on prepayment of two USD Bonds,” the BOJ’s response concluded.
Data for the first two weeks in September suggest that there is likely to be no new net inflows for the month from the regular foreign exchange market and the NIR could end at just about US$3.1 billion after the payout of the GOJ bonds, if BOJ does not issue new CDs to mop up the liquidity that would flow from the payout.

Tbill rates in sharp drop

Interest rates are falling with the Treasury rates falling sharply in the latest auction last week.
Rates fell by 53 basis points for the 182 days Treasury bills, the most since June 2014 when it fell by 57 basis points.
The average rate fell to 5.45 percent, the lowest level since 2012 and broke decisively, the resistance level at just under 6 percent and seems set to reach just around 4 percent before too long. Investors pumped $2.63 billion into the auction for the $600 million on offer. At the same time $3 billion chased $600 million offered for 91 days, with the average rate falling to 4.985 percent from 5.49 percent in August. The decline for the 91 days instrument, is the third fall since the rate rose modestly in June, to 5.77 percent and the sixth monthly decline for 2017. The fall in the rates better aligns them with the central bank’s new overnight reference rate.

Data suggest economy grew 2-3%

Agriculture was affected is said to be affected by poor weather resulting in slow GDP growth.

A series of some critical data being looked at suggest that the Jamaican economy is probably growing in real terms around 2-3 percent for the first half of 2017, far greater than the 0.2 percent the Planning Institute of Jamaica (PIOJ) seems to be suggesting.
Criticizing official data put out by professionals within the governmental system is not easy and sometimes unwise, but when the data seems to fly in the face of reality, cautionary warning is warranted.
The PIOJ put out data on the economy for the second quarter, indicating a 0.3 percent growth over the same period in 2016. According to one of the daily papers, the head of PIOJ stated “that the preliminary cost of damage and losses incurred was $4 billion or 0.2 percent of Jamaica’s 2016 gross domestic product (GDP), which negatively impacted the performance of key sectors, including agriculture, forestry and fishing; mining and quarrying; and electricity and water supply. Mining and quarrying, and agriculture, forestry and fishing, contracted by 10.5 and 8.5 percent, respectively.”

‘Vegetables and Starchy Foods’ is said to have suffered from heavy rains in the Q2 period.

While the Statistical Institute of Jamaica is the appropriate place for GDP data, the PIOJ do have the capability to do reasonable estimates. The problem is that data on agriculture to a large extent, are “quesstimates” coming out of the Ministry of Agriculture as far a domestic crop production is concerned. The data they put out in 2016 is at a huge variance with what other more credible data suggests. In the second half of 2016, the “quesstimates” showed agriculture growing at an astonishing 29 percent in the third quarter and 16 percent in the December quarter following the 9 percent increase in the second quarter of the year. The figures for second quarter in 2016 would have been more but for the fact that the Appleton sugar factory was closed for the entire season.
Where did this strong 2016 growth come from all of a sudden and why has it stopped in 2017? The authorities would want us to believe that 2017 fall is due to floods in the quarter. The only problem with that assertion is that the floods were mostly within the Clarendon area. Clarendon mainly produces livestock, cane and citrus, there is no evidence that production of these crops were badly affected. Production of most ground provisions would not have been affected and these are mostly grown in Manchester, Trelawny and St. Elizabeth. Vegetables in some areas may have been affected but hardly likely, since St Elizabeth would have most likely welcomed the rains for the vegetables growing. The most likely factor is that the ministry assumed damage to crops beyond what actually took place and secondly and most importantly they used wrong estimates for most of 2016.

20 South, Apartment complex currently under construction in Kingston and adding to growth.

Except for sugar canes that can be harvested mechanically, it is not possible, to enjoy a major increase in agricultural production against falling employment. That there could be a huge variance between production and employment in 2016 suggest that there were error in data gathering. Sectorial GDP growth of 9, 16 and 29 percent while employment in the sector declined 7 percent, rises just 3 percent and falling 4 percent respectively seem improbable.
The strange thing is that employment in the sector rose 3 percent in the first quarter of 2017 but GDP in the sector is down 4 percent. Why would the farming community be employing 6,700 more workers, if production is falling as the PIOJ is suggesting?
GCT collected in 2017 to July on local goods and services came in at $28.751 billion, 12.5 percent higher than for same period in 2016 of $25.57 billion and the 2016 figure grew just 4 percent from $24.58 billion collected to July 2015. Tax revenues are up to $153.63 billion from $142.62 billion some $11 billion or 7.7 percent higher, after an $8 billion fall in PAYE revenues offset by some tax increases. The data suggest that the economy is probably growing around the 2-3 percent range in real terms. Higher growth is partially backed up by employment numbers of approximately 36,000 over the past year which suggests growth closer to 2 percent. JPS data shows electricity net sales, rising by a strong 7.6 percent in the second quarter of the year a 5.5 percent in the half year suggesting that growth cannot be far from these levels. In contrast growth in net sales was slightly down in both periods in 2016 and was consistent with low growth in that year.
According to the Statistical Institute of Jamaica “Agriculture, Forestry, & Fishing: Data on agricultural production and production expenses are collected from several sources. With respect to commodities that are mainly for export, production information is obtained from commodity boards and International Merchandise Trade Statistics. For animal farming, fishing and commodities produced mainly for local consumption, data on quantity and prices are obtained from the Agricultural Marketing Information Division of the Ministry of Agriculture & Fisheries (MOA).”
“Information on cost of production is obtained from the Agricultural Marketing Information Division and commodity boards. Financial statements from large farms and studies undertaken by the MOA are incorporated into the compilation of the estimates.”
“Annual estimates: the first estimate is preliminary and this is followed by two subsequent revisions. However, estimates are open for revisions when new or improved data become available.”
“Quarterly estimates are revised when those of the subsequent quarters of the same calendar year are released. Estimates of previous years are only revised at the time of release of the first quarter estimates.”

Surplus in 4 months to July

Central government of Jamaica’s fiscal operations, rack up a tidy surplus, in contrast to a sizeable deficit budgeted to July this year, data on the government’s operations, recently released show.
This development is unusual at this time of the year when deficits are usually racked up until the last fiscal quarter, the period when surplus revenues are generated.
The surplus was helped by an $11.4 billion in capital inflows showing up as divestment proceeds/other and is boosted by a near $6 billion increase in recurring revenues over forecast and a $7 billion underspending thus ensuring a healthy surplus for the 4 months period amounting to $5.4 billion, against a budgeted deficit of $7 billion. The critical primary surplus a major benchmark of the IMF agreement rest, ended at $38.6 billion versus $29 billion planned.
Also contributing to the positive outcome was a cut in non-payroll expenditure of $6 billion, reduced interest cost of $3.2 billion and positive tax revenues of $5.4 billion. Corporate taxes rose 34 percent above forecast adding $3.3 billion more than the $10 billion planned but corporations are not paying over tax withheld on dividend with only $386 million being paid versus projection of $506 million. Special Consumption Taxes on import fell $2.8 billion while the tax on local production rose by $3.5 billion, from forecast and travel taxes providing $1 billion more than planned.

US$ Demand falls sharply in Jamaica – Friday

Trading in the Jamaican foreign exchange market on Friday, resulted in a big difference between purchases and sales, with purchasing of all currencies ending at US$42.05 million and outflows at US$26.69 million.
Purchases by dealers on Thursday amounted to the equivalent of US$83.06 million while dealers sold US$59.28 million.
At the end of trading, the US dollar was sold at J$129.52 from J$129.65 previously while dealers bought the US currency at an average of J$128.42 versus J$128.87 on Thursday.
In USA dollar trading, inflows ended at US$38.63 million versus US$76.39 million on Thursday with outflows of US$24.41 million compared to US$53.52 million.
The selling rate for the Canadian dollar rose to J$104.30 from J$103.77 at the close on Thursday while the British Pound was more costly, with J$167.22 buying the British currency versus J$165.72 and the euro, gained in value against the Jamaican dollar, with it taking J$153.82 to buy the European common currency, versus J$153.55 previously.

Jamaica’s forex inflows jump – Thursday

Trading in the Jamaican foreign exchange market on Thursday resulted in a big surge in the amounts purchased and sold by dealers and a fall in the value of the local currency against the US dollar.
Trading ended with inflows of US$83.06 million compared to US$45.12 million on Wednesday. Outflows amounted to only US$59.28 million compared to US$45.80 million of all currencies on the prior trading day. Inflows for August ended at US$955 million up from US$939 million in July while outflows were almost the same in both months at US$751 million versus US$750 million in July. Interestingly while inflows for June was in the order of August and July at US$939 million outflows were far higher at US$872 million.
At the end of trading the US dollar was sold rate of J$129.65 from J$129.33 previously, even as inflows rose sharply over Wednesday’s intake. Dealers bought the US currency at an average of J$128.87 versus J$128.16 on Wednesday.
In USA dollar trading, inflows ended at US$76.39 million versus US$39.70 million on Wednesday with outflows of US$53.52 million compared to US$37.91 million.
The selling rate for the Canadian dollar rose to J$103.77 from J$103.71 at the close on Wednesday while the British Pound was less costly, with J$165.72 buying the British currency versus J$167.53 and the euro, lost value against the Jamaican dollar, with it taking J$153.55 to buy the European common currency, versus J$157.24 previously.

Jamaican$ drops to J$129.33 to US$1

Trading in the Jamaican foreign exchange market on Wednesday resulted in the Jamaican dollar declining in value against the US dollar, following Tuesday’s decline with the selling rate ending at J$129.33 from J$128.77 previously, even as inflows rose over Tuesday’s intake.
Dealers bought the US currency at an average of J$128.16, versus J$127.36 on Tuesday. Trading ended with inflows of US$45.12 million compared to US$38.41 million on Tuesday with Bank of Jamaica is entitled to approximately 25 percent of the inflows or around $10 million of Wednesday’s intake. Outflows amounted to only US$45.80 million compared to US$35.70 million of all currencies on the prior trading day.
In USA dollar trading, inflows ended at US$39.70 million versus US$31.76 million on Tuesday with outflows of US$37.91 million compared to US$26.33 million.
The selling rate for the Canadian dollar fell to J$103.71 from J$104.44 at the close on Tuesday while the British Pound was more costly, with J$167.53 buying the British currency versus J$167.23 and the euro, rose in value against the Jamaican dollar, with it jumping to J$157.24 to buy the European common currency, versus J$156.41 previously.

US$65m slated for sale by BOJ

The Bank will be offering USD65 million over the next four weeks in its foreign exchange auction to eligible Authorised Dealers and Cambios.
The amount represents an increase over the quantity offered in August of US$35 million prior to the amount to be auctioned on Wednesday, 30 August.
September is usually a period when inflows tend to dip below normal levels and may be the reason why the amounts to be offered have been increased.
The weekly schedule outlined by the BOJ is: US$5 million on Wednesday, 30 August, the same amount as last week, US$10 million on Wednesday, September 6, US$20 million on September 13 and US$30 million on September 20.
The central bank is only returning to the market amounts it would have taken under the compulsory surrender of 25 percent from Authorised Dealers and Cambios during the month. It is unclear as to the reasons why Bank of Jamaica has not reduced their compulsory take from the market. In 200 the central bank hiked the amount when the price of oil was around US$100 a barrel as the amount to fund Petrojam was being provided by BOJ. Now that the price is around U$50 why is the weekly take not reduced?
In 2009, Bank of Jamaica established the Foreign Exchange Surrender Facility for public sector entities (PSE Facility). The aim of the facility is to centralize foreign currency demand of the public sector, especially Port Authority of Jamaica, National Water Commission and Petrojam. Under this facility Commercial Banks agreed to surrender fifteen percent (15%) of foreign currency purchases daily. The pre-existing requirement where Authorized Dealers and Cambios surrender within range of five percent (5%) to ten percent (10%) of their gross foreign currency purchases from commercial clients remains in effect. Therefore commercial banks are to surrender, in total between twenty percent (20%) to twenty-five percent (25%) of foreign currency purchases daily. At the start of 2015, the surrender requirements were increased thirty percent to thirty-five percent for Authorised dealers and twenty-five percent for cambios.