No Inflation in Jamaica

With 5 months having elapse for 2018 data put out by the Statistical Institute of Jamaica (STATIN) show Jamaica still having deflation of 0.7 percent, the same as in April.
According to STATIN, the All Jamaica Consumer Price Index recorded a negligible movement for May 2018, The main contributor to this movement was the 0.2 percent fall in the index for the heaviest weighted division ‘Food and Non-Alcoholic Beverages, due mainly to lower prices for agricultural produce, especially vegetables such as cabbage, carrot, sweet pepper, tomato and lettuce.
Tempering the declining items was a 0.2 per cent increase in ‘Housing, Water, Electricity, Gas and Other Fuels’, primarily resulting from higher electricity rates, offset by a reduction in water and sewage rates. May out turn brings inflation in the past twelve months to May to was 3.1 percent.

More fall in Treasury bill rates

Government of Jamaica Treasury bill sample

Treasury bill rates declined again at the latest auction for $1.4 billion offered by Government of Jamaica on Wednesday.
At the latest Treasury bill auction, the average rate on the 91 days bill declined to 2.544 percent from 2.71 percent at the May auction, while the 182 days instrument average rate dipped to an average of 2.656 percent from 2.83 percent for May. The two offerings of $700 million each, attracted a total of just over $5.3 billion, an indication of continued high liquidity in the market.
The continued fall in rates comes against the back ground of negative inflation of 0.6 percent up to April, including deflation of 0.40 percent in April.

BOJ cuts policy rate to 2.5%

Bank of Jamaica cut their overnight policy rate by 25 basis points to 2.5 percent as Treasury bills rates fell at the latest auction for $2.1 billion offered by Government of Jamaica on Wednesday.
The central bank cited a raft of reasons for the move, but two factors not mentioned is the negative 0.4 percent fall in inflation in April leading to negative inflation of 0.6 percent year to date and the further fall in Treasury bill rates at Wednesday’s auction.
At the latest Treasury bill auction the rate on the 91 days bill declined to 2.71 percent from 2.818 percent in April, while the 182 days instrument average rate ended at 2.83 percent and is down from 2.979 percent in April. The 272 days Treasury bill cleared at an average of 3.08 percent with the highest allotted yield being 3.4 percent. In the three offerings of $700 million each attracted a total of just over $7 billion, an indication of the high liquidity in the market.
The central bank stated that “the risks to the inflation forecast are assessed to be skewed to the downside. The major downside risks to inflation include weaker than anticipated domestic demand conditions and slower than anticipated global economic growth stemming from geo-political tensions and protectionist policies. One upside risk to inflation is higher than anticipated commodity prices, particularly the price of crude oil. The risk of adverse weather may also cause domestic agricultural prices to rise faster than anticipated”.
“Bank of Jamaica’s decision to maintain an accommodative policy stance is aimed at supporting further credit expansion and faster GDP growth. When adjusted for expected inflation, the policy rate remains negative in real terms in a context of high liquidity in financial markets.

Interest rates are falling and will drive stocks higher in 2018.

These conditions are considered to be appropriate at this time given the weaker-than-desirable pace of credit expansion.”
“This decision is made against the background of positive macroeconomic indicators. Net international reserves are increasing and the current account of the balance of payments, while projected to widen, will remain at sustainable levels. Market interest rates are at record lows and falling and fiscal performance continues to be strong.”
The fall in the overnight rate translates to a 9 percent rise in stock market prices, but rates seem likely to decline some more before settling off before the year ends and stocks should enjoy more gains as a results.

Jamaica’s inflation drops 0.4% in April

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Data from the Statistical Institute of Jamaica reveals another month of falling prices for Jamaica with a decline of 0.4 percent in April.
April fall, follows negative 0.1 percent in February and March and no change in January. inflation for 2018 is now negative 0.6 percent and would reduce inflation over the past twelve months to 3.5 percent.
In April Statin stated that the main contributor to the deflation in March was a 1 percent fall in Food and Non-Alcoholic Beverages category, due to lower prices for agricultural produce resulting in a 4.3 percent reduction in index for the class Vegetables and Starchy Foods and Transportation also recorded a decline.

23,000 more Jamaicans employed

More Jamaicans continue to gain employment as the economic growth gathers pace with 22,600 persons added to the employment list, an increase of 1.9 percent more persons being employed over the year to January.
The increased number of employed persons, lifted the employed in January 2018 to 1,206,600, up from 1,184,000 employed in January 2017.
Over the period, male employment increased by a mere 1,900 persons over the twelve month period to reach 664,200 in January 2018 while female employment increased by 20,700 or 4 percent to 542,400.
According to the Statistical Institute of Jamaica, the unemployment rate fell to 9.6 percent at the start of the year and is down sharply from 12.7 percent in January 2017. The lower rate of unemployment came as a result of decline in the total number of persons in the labour force and the increase in employment. In October last year the unemployment rate fell to 10.4 percent.

T-bill rates lowest on record – April

Jamaica’s Ministry of Finance newest office building

Treasury bill rates declined to the lowest level on record, in the latest auction of bills on Wednesday this week. Information out of the country’s central bank in March indicates that there are no records with lower rates.
Rates for the $700 million 182 days instrument on offer fell below 3 percent for the first time with the average ending at just 2.979 percent and the 91 days bill ended at an average slightly above 2.818 percent for the $700 million that was also on offer for the shorter duration.
A total of $2.56 billion chased after the amount offered for the shorter dated issue, while a total of $2.92 billion chased the amount for the longer dated issue.
In March, rates fell to 2.977 percent for the 91 days bill, as $2.54 billion went after $600 million offered and the 192 days closed at an average of 3.172 percent with $2.48 billion going after $600 million offered.

Deflation for Jamaica’s Q1

Prices declined for another month in Jamaica, according to data just released by the Statistical Institute of Jamaica (STATIN) but prices are still high than a year ago.
Statin stated that the All Jamaica Consumer Price Index declined for the second consecutive month as a negative 0.1 percent inflation rate was recorded for March 2018. The main contributor to this movement was the 1.0 percent fall in Food and Non-Alcoholic Beverages category, due to lower prices for agricultural produce resulting in a 4.3 percent reduction in index for the class Vegetables and Starchy Foods. Transportation recorded a decline of 0.4 percent for the period, resulting from lower fuel prices. Upward movement of a 3.2 percent in Housing, Water, Electricity, Gas and Other Fuels, primarily resulting from higher electricity, water and sewage rates help to negate the above mention declines. As at March 2018, the calendar year-to-date inflation was negative 0.2 percent and the movement in the index for the last twelve months is 3.9 percent.

Jamaica’s company taxes jump 23%

Corporate taxes continue to be a star performer for Jamaica government revenues, having increased their input by a strong 23 percent over forecast, to February.
According to the government fiscal report, businesses paid $34 billion in corporate taxes to February or just over $6 billion more than projected. In spite of that level of performance, PAYE contributed more in taxes, at $48 billion even as government raised the threshold to $1.5 billion for individuals and cutting around $25 billion in the individual tax bill.
Corporations will be making big payments in March that should hike the amount they will pay for the fiscal year to be well ahead of the February figure. The forecast at the start of the fiscal year, was for a total take of $50.6 billion compared to $46 billion for 2016. The forecast for 2018/19 is for an intake of $63.9 billion or an increase of 26 percent over the 2018 forecast. If the trend for the just concluded fiscal year holds to March, the projected increase for the new fiscal would be just around $3 billion.

Scotia Group to contribute most to 2017/18 corporate taxes

Other areas performing well above budget projections include, Travel taxes up by 12.5% to $17.5 billion, GCT on local goods and services 4.8 percent to $83 billion, Education taxes up 6 percent to $24 billion and special consumption taxes on local goods up 10 percent to $26 billion.
Listed companies will contribute around $21 billion to the corporate tax take for the just concluded fiscal year according to data taken from financial statements. The bulk of the listed companies’ contribution will come from Scotia Group with $5.7 billion, NCB Financial $5 billion, Sagicor Group $2.9 billion, Carreras just over $1 billion, Grace Kennedy around $1 billion, JPSCo and JMMB Group just under $1 billion. Other billion dollar contributors should include Desnoes and Geddes and Wray and Nephew.

PAYE out performing forecast

Collection of PAYE taxes up to February, is ahead of target by $1 billion, according to data put out by the Ministry of Finance.
This category of individual tax contributions, was projected to generate $47.3 billion but contributed $48.3 billion instead, up to February.
The out turn is quite remarkable when viewed against the out turn at the end of December when there was a shortfall of $1.24 billion. For 2018 up to February, PAYE pulled in $2.3 billion more than planned or just over $1 billion more, monthly.
The current government, raised the personal tax threshold on which no taxes are paid, to $1.5 billion over a two year period, starting in July 2016 with the first tranche, with the second portion implemented in 2017. The estimated cost for the measure was over $25 billion in the current fiscal year. The government announced increased taxes to fund the give back, but data for the last two fiscal years show revenues increasing well in excess of forecast, an indication that there was no fiscal need, to effect the tax increases that were made at the time of implementing the threshold hike. Ongoing buoyancy in government revenues would have more than compensated for taxes lost but IMF demanded the increases apparently to stave off inflationary pressures that would have arisen if the increase in take home pay was not neutralised.

$50B surplus hikes Jamaican government spend

Minister of Finance Audley Shaw managed to create a huge fiscal surplus before planned increased spending in March.

Government of Jamaica would end up with a huge surplus for the 2017/18 fiscal year with revenues to February running well ahead of forecast and expenditure sharply lower than budgeted, but even with increased spending planned for March, the surplus could still be large.
Figures released by the Ministry of Finance to February showing a large surplus, the fiscal year was set to achieve a huge surplus around the $50 billion. The likelihood of this huge surplus resulted in government trying to spend as much as possible in March, to reduce the excess that has built up. One item that the government earmarked for payment to reduce the surplus funds to February, is the payment of the increase in civil servants’ salaries. Up to February, there was a shortfall of $6 billion in salary payments, which seems to represent mostly back payment for the fiscal year. Payment in March, would cut the under spending showing at the end of February to a $9 billion. The under spending includes interest cost being lower than planned that accounts for $5 billion of the under spent amounts.
In order to reduce the surplus sharply the revised estimates increased spending at $564 billion for the fiscal year, $42 billion more than the original forecast and would require spending of nearly $80 billion in March, if that were to be achieved, even with the back pay for civil servants being done in March that would be a big challenge with underspending to February with just 1 month that was left in the fiscal year, unless they were to clear up arrears of debt they have in the system.
Figures released by the Ministry of Finance, show that the operations to February, resulted in an overall surplus of almost $3 billion well above the projection of a deficit of $23 billion. The vast improvement arose from an $11 billion increase in revenues over budget, to reach $476 billion and less spending of $15 billion, with the latter benefiting from the late payment of increased salaries for the civil service. Revenues would have been far better but for tax refunds on interest that saw a reduction in inflows of more than $5 billion.
The original projection was for revenues for the fiscal year to be $535 billion and expenditure of $537 billion with spending of $37 billion and revenues of $70 billion in March and that would have put the fiscal numbers into a balanced position, with the planned for a fiscal deficit in February.