Jamaica’s Inflation spikes in June

‘Vegetables and Starchy Foods’ had a strong impact on price movement in June.

The Consumer Price Index for June 2017 increased by 0.7 per cent, represented the highest monthly movement for the 2017 to date, a release from the Statistical Institute of Jamaica (Statin) stated.
The rate of inflation for the calendar year-to-date was 2.1 percent, 4.4 percent over the last June last year and the fiscal year-to-date was 1.1 percent.
According to Statin, the sharp increase in June was due mainly to increases in the index for the three heaviest weighted divisions: Food and Non-Alcoholic Beverages up by 1.1 per cent, Transport 0.4 percent and Housing, Water, Electricity, Gas and Other Fuels up by 0.4 percent. The Food and Non-Alcoholic Beverages division was impacted by the flood rains in mid-May, which disrupted the supplies of agricultural products and resulted in a 3. 7 percent rise in Vegetables and Starchy Foods. The increase in the Transport division was influenced by higher prices for petrol. Increased electricity rates was chiefly responsible for the upward movement in the division Housing, Water, Electricity Gas and Other Fuels, as the class Electricity, Gas and Other Fuels rose by 1.1 per cent. However, the overall movement of the division was tempered by the 1.3 percent decline in the class Water Supply and Miscellaneous Services Related to the Dwelling. Other notable increases were recorded for Restaurants and Accommodation Services, 0.6 percent and Recreation and Culture, 0.4 percent.

Jamaica’s remittances crawl higher

Jamaica garnered US$752 million in remittance inflows in the four months to April this year or just 1.7 percent over the same period in 2016. For the similar period in 2016 inward remittances grew 3.5 percent over 2015.

The increase rate pales in comparison to Guatemala which grew of 13.6 percent, El Salvador 10.6 percent and Mexico 6.8 per cent, data from Bank of Jamaica stated.
Outgoing remittances fell 2.7 percent to US$78 million for the 4 months versus the four months period in 2016 and resulted in net inflows of US$674 million for an increase of 2.2 percent or US$14.5 million relative to the previous corresponding period.
The USA, continues to be the main source for remittances with 66 percent, followed by United Kingdom at 11.9 percent, Canada 9.4 percent and the Cayman Islands 6.1 percent. The flows from the Cayman Islands continues to raise concerns as the amounts are out of proportion to the population size of that country.
As large as remittance flows are, data contained in the remittance report for April out of Jamaica’s central bank show a decline in relation to Tourist Expenditure, falling from 95.6 percent in 2014 to 90.3 percent in 2016. The comparison with exports, shows a far differing pattern, with it almost being twice the level of 2016 exports, at 192 percent compared to 149 percent in 2014. As a percentage of imports, remittances have moved to 48 percent versus 37 percent in 2014.

Jamaica just eked out Q1 growth

Economic activity in Jamaican in the March 2017 quarter was virtually zero, according the data put out by Statistical Institute of Jamaica (Statin), the government body charged to collating economic data on the country. The results are subject to revision with the final out turn likely to be arrived at more than a year from now.
Statin stated that weather conditions affected production in both agricultural and the mining sector in the quarter leading to declines in those sectors.
According to the release by Statin, the economy grew by a mere “0.1 percent in real terms for the first quarter of 2017 when compared to the similar quarter of 2016. This growth was due mainly to a 0.4 percent increase in the Services industries. While there were improved performances in both the Manufacturing and Construction industries.” “The overall goods producing industries declined by 0.9 percent,” the report stated.
All industries within the Services industries recorded higher levels of output with the exception of Producers of Government Services which remained relatively unchanged.

Growth in Manufacturing grew 2.7%.

Increased output was recorded for: Electricity & Water (0.5 percent), Wholesale & Retail Trade; Repairs; Installation of Machinery & Equipment (0.3 percent), Hotels & Restaurants (1.1 percent), Transport, Storage & Communication (0.4 percent), Finance & Insurance Services (1.0 percent), Real Estate, Renting & Business Activities (0.3 percent) and Other Services (0.4 percent). Increase in visitor arrivals and increased activities in the restaurant group positively impacted the Hotels & Restaurants industry. Output of the Goods Producing industries declined by 0.9 percent due largely to a 3.6 percent reduction in Agriculture, Forestry & Fishing and a 9.9 percent decline in Mining & Quarrying.
“The performance of the Agriculture, Forestry & Fishing industry was negatively affected by drought conditions in the south central parishes and heavy rainfall in the North Eastern parishes. The Mining & Quarrying industry was affected by operational problems at one of the factories, heavy rainfall and a loss in the market share from the United States of America for crude bauxite. The Manufacturing industry grew by 2.7 percent and Construction by 0.6 percent. Increased output from the Manufacturing industry was influenced mainly by a 5 percent increase in the Food, Beverages & Tobacco sub-industry. The overall growth in the Manufacturing industry was however, tempered by a 3.4 percent fall in petroleum output. The performance of the Construction industry reflected increased activities in the building construction and building installation sub-groups. The industry continued to benefit from the expansion and renovation in the hotel sector,” Statin said.

Q1 non-traditional exports surge

Jamaica’s Non–Traditional Domestic Exports jumped sharply in the March 2017 quarter to almost equal Traditional Domestic Exports with just US$9 million separating the two.
The non-traditional exports was one of the bright spots in the country’s external trade performance which saw the trade deficit widening in the quarter as oil imports almost doubled in the quarter growing by 81 percent.
Non–Traditional Domestic Exports earned US$146 million, a stunning 42 percent or US$43 million increase over the similar 2016 period, this compares with Traditional Domestic Exports during the first quarter which were valued at US$155 million, a mere increase of US$7.7 million or 5.2 per cent over the first quarter of 2016.
The merchandise trade deficit worsened to US$996 million compared to US$795 million in the similar quarter of 2016, the Statistical Institute of Jamaica reported.
The second half of 2017 should see an improvement in traditional exports as the Alpart alumina plant is now back in production.

Is BOJ planning cut in interest rate?

Bank of Jamaica is dropping the 30 day repo rate as its policy rate effective July 1st. According to the central bank, “its policy rate will be the interest rate that it pays on overnight deposits held by deposit‐taking institutions at Bank of Jamaica currently 3.75 per cent per annum.”
The overnight rate when annualized, is sharply lower than the 30 days rate which currently sits at 4.75 percent per annum and could well be interpreted as an indication that BOJ is signaling that rates are due to fall. With low inflation currently being enjoyed, revaluation of the Jamaican dollar ahead of increased inflows in the next few months and a healthy Net International Reserves, the time seems almost perfect for the engineering of a cut in interest rates before too long.
The interest rate that BOJ pays on its 30 day certificates of deposit will no longer be designated as the policy rate. Bank of Jamaica will continues to offer 30 day certificates of deposit to primary dealers and deposit‐taking institutions, effective 28 July 2017, they will be issued in fixed volumes by competitive multiple‐price auctions.
According to the Central Bank they are making this change “in order to strengthen the relationship between the policy rate and market interest rates which, in turn, influence the spending and saving decisions made by businesses and consumers. By this means, the Bank is able to influence the rate of inflation in pursuit of the inflation target.
The move comes against the background of Treasury bill rates easing why open market one year rates have climbed to 8.82 percent in the most recent auction held on June 23, with 60 bids comprising $3.49 chasing after $3 million offered, rising from 6.06 percent on May 26 when there were 53 bids going after $2 million and rising to 7.07 percent on June 9 with 37 bids amounting to $2.07 chasing $3 million.
Treasury bills have seen 192 instrument ending mid-June at an average of 6.13 percent compared to 6.10 in May and 6.40 in April and the 91 days T-bill ending at 5.77 percent in June being slightly higher than the 5.65 percent in May.
Rates paid by the deposit taking institutions to the central bank on 14 day repo has fallen from a high of 7.68 percent on March 26, to just 5 percent on April 24 and now sits at 5.84 percent for the June 26 auction as three bidders applied for the funds available.

GOJ chops $7.6b off deficit

Government of Jamaica fiscal deficit dropped by $7.6 billion below budget to end at just $4.2 billion for the first two months of the 2017-18 fiscal year. Unbudgeted inflows of $5.2 billion and reduced expenditure of $1.9 billion versus budget were mostly responsible for the improvement.
The primary surplus projected at $8.2 billion jumped to $15.5 billion with the help of the increased inflows and reduced expenditure.
Corporate taxes accounted for a shortfall of $228 million, PAYE for $568 million tax on interest $272 million, stamp duty $403 million and special consumption taxes on imports $1.1 billion. Categories that out performed are special consumption taxes on local goods $336 million, Education taxes $309 million, GCT on local goods and services $518 million, Custom Duty $348 million, Travel tax $510 million and GCT on imports $376 million.
The collection of PAYE for the two months is running at $8.9 million 30 percent lower than the $12.7 billion the government raked in before the increase in the tax threshold that became effective in July last year for the first tranche. On the other hand, Education tax this year of $4.3 billion, is running 13 percent ahead of the $3.8 billion collected for April and May last year.

Inflation rate drops in May

Inflation in Jamaica after rising 0.4 percent in January and March and 0.3 percent in April has now fallen to just 0.1 percent for May this year, half of the 0.2 percent rise in February.
The increase for May brings the year to date 1.4 percent and the fiscal year-to-date to 0.4 percent. The inflation rate over the last twelve months rose to 4.6 percent. With the price of oil on the world market slipping recently, a low level of inflation can be expected for some time to come and could result in the year over year rate declining form the above level.
According to Statistical Institute of Jamaica the inflation for May is due to an increase of 0.1 percent in the index for the heaviest weighted division, Food, Non-Alcoholic Beverages and Tobacco. Within this division the group Food rose by 0.1 percent while other notable increases were recorded in the following divisions: Transport 0.2 percent, Alcoholic Beverages and Tobacco 1.6 percent and Restaurants and Accommodation Services 0.3 percent. The upward movement in the index was tempered by a 0.2 percent fall in the division Housing, Water, Electricity, Gas and Other Fuels due to lower rates for electricity, water and sewage.

Trinidad economy remains pressured

“Liquidity of the financial sector was relatively comfortable. Commercial banks’ excess reserves at the Central Bank averaged TT$3,441 million in April 2017 and hovered around this level for much of May,” the Monetary Policy Committee (MPC) the Trinidad and Tobago central bank in commenting on the country’s economy stated recently.
The MPC went on to state that “credit growth remains slow with credit granted by the financial system to the private sector increasing by 2.6 percent (year-on year) in March 2017 compared with 3.2 per cent a month earlier, with loans to businesses actually declining by 0.7 per cent in the year to March.”
Oil production in the first quarter of 2017 was higher than over the previous three quarters, but 1.6 per cent lower than in the first quarter of 2016. Evidence of a pick-up in energy exploration activity was visible which is expected to bolster output in the short to medium term. Natural gas production output in January to March fell by 8.4 per cent than the period in 2016. Other available non-energy statistics suggest that construction and distribution activities were very subdued in early 2017,” the MPC stated.
Inflation remained low with the 12-month headline rate in March 2017 at 2.8 percent, up from 2.6 per cent in the previous month and close to the 3 percent averaged over the past 6 months. Core inflation was 2.6 per cent (year-on-year) in March. The weak inflationary pressures were also reflected in the indices of producer prices and building material prices (an increase of 2.8 per cent and a decline of 0.6 per cent on a 12-month basis respectively, in March 2017)” the Committee observed.
In its deliberations, the MPC noted that the domestic economy continued to need support toward recovery, and that the risk of overheating did not appear imminent in light of the recent information on inflation. At the same time, the narrowing of interest differentials between Trinidad and Tobago and the US has implications for the balance of payments. In light of these factors, the MPC decided to maintain the Repo rate at 4.75 per cent.

Jamaica’s exports surged 31%

Jamaican Teas CEO, John Mahfood, telling shareholders about a strong increase in exports for the March Quarter.

Jamaica’s exports earnings grew by a strong 31 percent or US$27 million to US$114 million in January this year at a faster pace than 25 percent jump in imports as the country’s trade deficit increasing by US61 million or 23.3 percent to US$323 million.
Imports rose US$88 million to US$437 million compared to US$349 million in January last year. For the period, imports of Mineral Fuels, increased of US$41.8 million or 76.6 percent to US$96 million, due to higher imports of Petroleum, Oils, Bunker C fuel, Automotive Diesel Oil, Motor Spirit, Propane and Butane. Imports of Machinery and Transport Equipment rose by 46.7 percent or US$40 million to US$125 million due to higher imports of motor vehicles. Manufactured Goods increased by US$11 million to US$53 million, mainly due to more iron and steel being imports. Miscellaneous Manufactured Articles increased by US$6 million to US$42 million. Beverages & Tobacco imports grew 41 percent increased to US$7 million.
Traditional Domestic Exports climbed 20.3 percent or US$10 million to US$61 million, above the comparable 2016 period, as all commodity groups recorded increases. Traditional Domestic Exports accounted for 56.2 percent of total Domestic Exports during the 2016 review period. Non– Traditional Domestic Exports jumped 56.4 percent by US$17 million to US$47 million.

Taxes push Jamaica’s April inflation

 

Increased taxes pushed inflation in April.

Increased taxation on fuel, cigarettes and pure alcohol and increase motor vehicle license were mostly responsible for the 0.3 percent increase in Jamaica’s inflation for April as measured by the Consumer Price Index.
The calendar year-to-date inflation amounts 1.3 percent, while inflation rate since April 2016 is 4.8 percent.
This upward movement was mainly due to the divisions, Transport recording an increase of 1.7 percent and the highest weighted division Food and Non-Alcoholic Beverages moving up by 0.1 percent. The upward movement in the Transport division was due mainly to the increase in the Special Consumption Tax levied on petrol. While increased consumption tax pushed inflation by of 0.9 percent in the Alcoholic Beverages and Tobacco division.
The overall inflation rate was tempered by the decline of 0.2 percent in the division Housing, Water, Electricity, Gas and Other Fuels, due to lower rates for electricity, resulting in a fall of 0.5 percent for the group Electricity, Gas and Other Fuels.