Non-traditional exports narrow trade deficit

August 6, 2013 by

Jamaica’s trade deficit narrowed for the first 4 months of this year by US$80 million as non-traditional exports jump by US$32 million to exceed traditional exports as traditional exports fell during the period and imports dropped. The overall traded deficit fell to US$1,522 million, down from US$1,602 million in 2012.

Domestic Exports | For the year to April, non-traditional exports increased by US$32 million or 12.4 percent to reach US$294 million. Its contribution to total domestic exports increased from 44.1 per cent in the January to April 2012 period to 50.7 per cent in the 2013 period, while traditional domestic exports fell to US$287 million by 13.6 percent or US$45 million when compared to the same period in 2012. The fall of traditional exports was impacted largely by the decline in “Mining and Quarrying” and “Manufacture”. Total export of goods is valued at US$605 million and is down from US$611 million in the 2012 period, a decrease of $6.6 million. The Jamaica Free Zone accounted for US$92 million of total exports during the 2013 period.

Imports | The country imported goods valued at US$2,127 million during the period, a decrease of US$87 million or 3.9 percent.  The value of imports, for all but three commodity groups declined. “Mineral Fuels, etcetera” despite its decline, had the largest share of imports representing 34.5 percent valued at US$733 million, “Machinery and Transport Equipment” valued at US$280 million, declined from the US$294 million recorded in 2012 by US$13 million or 4.5 per cent.  “Manufactured Goods” valued at US$175 million also decreased, moving downwards by US$27 million or 13.2 per cent.

Caricom_logo150X150Caricom| Imports from CARICOM for the first four months of 2013, fell by US$99 million or 28.4 per cent compared with 2012 and accounts for 11.7 percent of total imports with a value of US$249 million compared to US$347 million recorded for the 2012 period. “Mineral Fuels, etcetera” decreased during the 2013 review period, by US$111 million or 42.7 per cent and was valued at US149 million. Other notable commodity groups imported from the region included “Food”, valued at US$60 million, “Beverages and Tobacco” US$14 million, “Chemicals”, US$10 million, and “Manufactured Goods”, US$8 million.

Total exports to CARICOM for the January to April 2013 period was valued at US$21 million, representing a decline of US$2 million or 8.8 per cent. Domestic exports to CARICOM decreased to US$17.8 million and accounted for 3.1 percent. Re-export for the period decreased and was valued at US$3.2 million, a fall of US$0.6 million or 16.2 per cent.

For the first four months of 2013, Jamaica incurred a trade deficit with her CARICOM partners of US$227.8 million when compared to the US$324.4 million recorded for the first four months of 2012.

USA deficit big drop | During the month of April 2013, the United States of America (USA) remained Jamaica’s main trading partner with imports worth US$744 million and total exports of US$322.9 million. Jamaica’s trade deficit with USA was US$421.5 million, compared to US$565.5 million in the January to April 2012 period.

The trade gap narrowed by US$96.6 million or 29.8 per cent, due mainly to lower imports of “Mineral Fuels, etcetera”.

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Fiscal deficit target exceeded again

August 1, 2013 by

A $1.5 cut in interest payment, a $2 billion reduction in capital spend and $1 billion saved on programs was more than enough to wipe out a reduction in revenues of $2.4 billion due to a number of factors in June this year.

Some $440 million in the revenue shortfall came from increased payment of withholding tax refunds on interest. Tax on dividends may have been over estimated on the assumption that the payment pattern would have remained. Instead many companies brought forth payments to March thus beating the taxation for a part of the annual payment.

Jamaica_coat_of_arms_280X150Telephone tax was way down no doubt a result of lower calling rates. Overall international trade delivered as planned but a few fell somewhat short. Local GCT was 15 percent up or around $500 million over forecast and was up 6 percent above the amount collected in June last year, while SCT fell short by $700 million against 2013/4 budget but this may be due to a shift between May and June as the May target was over achieved and may have shifted some of the inflows to that month which enjoyed $900 million more inflows than planned. Company profit tax fell $500 million short of plan.

Due to the savings on the expenditure side and overachievement in the first two months, the fiscal deficit to date is running well ahead of plan by $4.8 billion, resulting in the deficit coming in at $5.4 billion. The deficit for May was just $1.63 billion against projection of $3.7 billion. The target for July is for a deficit of $1.7 billion, but August is a huge $10.8 billion.

Compared to 2012 revenues, this year is running well ahead of the quarter to June last year by 13.5 percent and 16.5 percent in the month of June versus June last year. In the past, the challenges start to occur in July and onwards when revenues starts to fall off from target. The sharp slowdown in cigarettes sales reported by Carreras could negatively affect special consumption tax revenues going forward for a while at least.

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T-bill rates move up again

July 24, 2013 by

Interest on Treasury bills rose again in the latest auction held on 24 July 2013. On offer were two instruments seeking to raise $400,000 each for 91 Days and the other of 182 Days duration. Both instruments were oversubscribed, unlike the auction in June when investors shun the longer dated issues.

In the July auction investors bid $700,977,500 for the 91 day issue and $ 513,898,400 for the 182 Days. The average rates came out at 7.995 percent for the 91 day bill this is up 64.5 basis points over the rate of 7.35 percent in the June auction. The 182 Days instrument came out at an average rate of 7.88 percent 76 basis points higher than the 7.12 percent average out turn in June. Investors however got rates ranging from 6.24999 to 7.84951 percent for the short date bill and 5.99999 to 8.74999 for the longer bill which were allotted in full. The rate reached as high as 7.995 percent for 24.2 percent of the allotment for the 91 day instrument and 9 percent for a very small portion of the 182 day t-bill.

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Business inflation expectations

July 23, 2013 by

A recent survey was conducted in May 2013 with 300 respondents showed that business sector expected inflation for the calendar year to be 10.3 percent, which is lower than the 10.6 percent they expected when the April 2013 survey was done. The expected inflation for calendar year 2013 was higher than the outturn of 8.0 per cent for 2012 and the annual point to-point inflation of 9.1 per cent as at May 2013.

In the latest survey respondents’ expectation of inflation 12 months ahead was down to 11.2 percent in the May 2013 survey from the 11.8 percent indicated in the April 2013 survey. Bank of Jamaica is saying that the expectation for lower inflation could have been indicative of the abatement in uncertainty surrounding the Government’s economic programme.

The central bank states that the Statistical Institute of Jamaica (STATIN) undertakes surveys of businesses on behalf of the Bank of Jamaica to ascertain the expectations about variables which are likely to have an impact on inflation in the near-term. In this regard, the survey captures the perception of Chief Executive Officers, Managing Directors and Financial Controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages and salaries. These responses assist the Central Bank in charting future policy decisions.

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Business sector expects rates to rise

July 23, 2013 by

A survey conducted in May 2013 on behalf of Bank of Jamaica, soliciting the views of executives of the private sector showed that the business sector expects the 180-day T-bill rates to increase to 6.5 percent in the three months hence, up from the 5.4 per cent expressed in the previous survey. In the May 2013 auction, the actual interest rate for the 180-day Treasury bills increased to 6.44 per cent from 6.39 per cent in the April 2013 auction.

The majority of respondents expected that the Bank’s Open Market Operation (OMO) rate would remain the same over the next three months. This was similar to the views conveyed in the April and March 2013 surveys. The percentage of respondents that were of the view that the OMO rate would remain the same increased to 51.3 per cent from 43.0 per cent in the previous survey. The results from the overall survey about expectations for the OMO rate were largely corroborated by the views of respondents in the financial sector

BankofJamaicaBOJThe Statistical Institute of Jamaica (STATIN) undertakes surveys of businesses on behalf of the Bank of Jamaica to ascertain the expectations about variables which are likely to have an impact on inflation in the near-term. In this regard, the survey captures the perception of Chief Executive Officers, Managing Directors and Financial Controllers about the future movement of prices, current and future business conditions and the expected rate of increase in wages and salaries. These responses assist the Central Bank in charting future policy decisions.

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Inflation slows to a crawl

July 19, 2013 by

Inflation levels declined sharply from what was reported in May due mainly to a decline of 2.5 per cent in the index for the division ‘Housing, Water, ‘Electricity, Gas and Other fuels’. This was mostly due to a reduction in prices for ‘Electricity, Gas and Other Fuels’ and for ‘Water Supply and Miscellaneous Services related to Dwelling’.

Statin, the government’s body for collection and collating the data, reported that the All Jamaica ‘All Divisions’ Consumer Price Index for June 2013 recorded a mere 0.2 per cent rate of inflation,  0.3 percentage points below the 0.5 per cent rate recorded for May 2013.  ‘Food and Non-Alcoholic Beverages’, the heaviest weighted division in the computation of the Index, recorded a 0.7 per cent rate of increase, resulting mainly from increased prices for ‘Fruits’ which was moderated by the declines mentioned above.

The other divisions that recorded increases were ‘Alcoholic Beverages and Tobacco’ 0.7 per cent, ‘Clothing and Footwear’ 0.4 per cent, ‘Furnishings Household Equipment and Routine Household Maintenance’ 0.5 per cent, ‘Health’ 2.0 per cent,  ‘Transport’ 0.2 per cent ‘Recreation and Culture’ 0.4 per cent, ‘Restaurants and Accommodation Services’ 0.3 per cent, and ‘Miscellaneous Goods and Services’ 0.7 per cent. There was no movement recorded for ‘Education and ‘Communication’.

The mean All Jamaica CPI for the second quarter in 2013 moved upward by 2.0 per cent in comparison to the 2.5 per cent for the first quarter. The calendar year–to-date inflation rate was 3.9 percent.

The Greater Kingston Metropolitan Area (GKMA) and Rural areas recorded increases of 0.3 per cent and 0.1 per cent respectively, while the inflation rate for Other Urban Centres (OUC) was relatively unchanged.

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Mining & Agriculture dent GDP badly

July 16, 2013 by

Data from the Statistical Institute of Jamaica (Statin) is confirming what Jamaicans already know — the economy suffered a decline in the first quarter of 2013. According to the government body charged with the collection and compilation of data, the economy declined by 1.3 percent in the first quarter of 2013 compared to the similar quarter of 2012. The sectors that made a big dent to the economic performance were Agriculture, Forestry & Fishing industry which declined by 11.4 per cent, Mining & Quarrying industry which fell by 9.1 per cent. These of course were not the only sectors to suffer reduced output.

The report indicated decreased output in both the Goods Producing and Services industries which fell by 4.5 per cent and 0.1 per cent respectively. Continued macroeconomic challenges in the economic environment as well as the lingering effects of Hurricane Sandy, which affected the island in October 2012, were the factors posted by Statin for the poor performance of the sectors and the negative economic performance in the first quarter.

Jamaica_coat_of_arms_280X150The Manufacturing sector declined by 1.6 per cent but there was improved performance in the Construction industry which grew by 0.7 per cent. There was mixed performance within the Services industries. Increased output was recorded by Transport, Storage and Communication (0.6 per cent), Finance and Insurance Services (0.2 per cent), Real Estate, Renting & Business Activities (0.4 per cent) and Other Services (0.1 per cent). Industries that experienced lower levels of output were Electricity & Water Supply (-3.0 per cent), Hotels and Restaurants (-2.3 per cent) and Producers of Government Services (-0.1 per cent). The Wholesale & Retail Trade, Repairs, Installation of Machinery & Equipment remained unchanged.

When compared with the fourth quarter of 2012, the real value added declined 0.5 per cent. Both the Goods Producing and Services industries recorded lower levels of output. The Goods Producing industries declined by 1.4 per cent while the Services industries declined by 0.2 per cent.

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BOJ raises rates to attract money

July 10, 2013 by

Bank of Jamaica, the country’s central bank, pushed up rates on its open market operations when it announced the latest series of CDs to mop up liquidity of Jamaican dollars.

At the last Treasury bill auction, investors sent a clear signal that they wanted higher rates to take on the risk of tying up their funds for more than three months. Will this move result in higher rates in the financial markets for the rest of the year? Some persons are of that view in light of the tight situation with the foreign exchange market. There is also the view that with the government pulling more revenues than originally projected and generating a smaller deficit than planned so far, the rest of the year could prove tight economically thus reducing demand in the country and by extension foreign currency.

According to a release from the bank, “To augment its liquidity management operations, the Bank of Jamaica will be offering two variable rate instruments commencing Tuesday, 09 July 2013 to Friday, 12 July 2013.”

The previous issue was priced at 6.99 percent for the 365 days instrument, 36 basis points lower than the current one.

The instruments on offer are:

  1. A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices semi-annually at 0.23 percentage point above the six month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first six months is 7.35 per cent per annum.
  2. An 18-month Certificate of Deposit, for an unlimited amount. The instrument re-prices semi-annually at 0.25 percentage point above the six month GOJ Treasury Bill rate existing at the start of each re-pricing period.

The initial coupon for the first six months is 7.37 per cent per annum. These offers are available directly to Primary Dealers and commercial banks. Other investors may access these instruments through a Primary Dealer. The term sheets for these Certificates of Deposit will be circulated via electronic mail to all Primary Dealers and commercial banks and will also be available on the Bank’s website at  www.boj.org.jm

The bank says that it will continue to offer its regular 30-day Certificate of Deposit at the current interest rate of 5.75 per cent per annum.

The previous issues which were available between Monday, 01 July 2013 to Thursday, 04 July 2013 carried the following terms:

  1. Variable Rate Certificate of Deposit 2013(D) which was originally issued on 12 June 2013 and is now being re-opened for a limited nominal amount of $2.0 billion. The tenor for the re-opened instrument is 164-days. This instrument maintains the original issue terms, viz, the initial coupon is 6.77 per cent per annum up to the first interest payment date on 12 September 2013 and re-prices quarterly at 0.15 percentage point above the three month GOJ Treasury Bill rate for the next interest payment date up to the maturity date on 12 December 2013.
  2. A 365-day Certificate of Deposit, for an unlimited amount. The instrument re-prices quarterly at 0.23 percentage point above the three month GOJ Treasury Bill rate existing at the start of each re-pricing period. The initial coupon for the first three months is 6.99 per cent per annum.
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Non-traditional exports climbs 18%

July 2, 2013 by

Exports of non-traditional commodities jumped 18 percent over the 2012 with a value of US$222 million during January to March 2013 period helping to propel it moved past traditional exports. The change accounted for a larger share of domestic exports, moving it from 44.4 per cent in the 2012 review period to 51 per cent in the current 2013 review period as traditional exports declined during the quarter.

Total traditional exports amounted to US$213 million in the 2013 review period, down from US$235 million in the previous 2012 period for a decrease of US$22 million or 9.3 per cent. The improvement in exports was insufficient to cover the increase in imports, leaving a bigger trade gap than in the similar quarter in 2012.  Total exports for the period amounted to US$451 million up from US$435 million in the 2012 period, an increase of US$16 million or 3.7 per cent.

Imports were valued at US$1.715 billion during the quarter, compared to the US$1.629 billion during January to March period last year, an increase of US$86 million or 5.3 percent. At the end of the quarter, the total merchandise trade deficit widened to US$1,264 million compared to US$1,195 million in the previous year.

Import categories | During the January to March 2013 period, there was a general upward trend in the value of imports for all but three commodity groups, “Mineral Fuels, etcetera”, “Manufactured Goods” and “Machinery and Transport Equipment”. The commodity group “Mineral Fuels, etcetera” had a value of US$566 million, a US$141 million or 19.9 per cent drop from US$706 million in the similar period in 2012.

Oil-pricepump150x150Higher imports of ’organic chemicals’ mainly ethanol, ‘medicinal and pharmaceutical products’ resulted in the value of imports rising by US$188 million over the January to March 2012 period.

Imports of “Food” was valued at US$279 million, up from the US$239 million reported for the similar 2012 period due to increases in ‘cereals and cereal preparations’, ‘feeding stuff for animals’, ‘miscellaneous edible products and preparations’ and ‘vegetables and fruits’.

Total Exports | Earnings from total exports during the January to March 2013 period amounted to US$451.0 million, of which domestic exports was valued at US$434.6 million and re-exports US$16.4 million.

Traditional Domestic Exports | During the March quarter of 2013, the contribution of major traditional domestic exports to the value of domestic exports decreased from 55.6 per cent in the first quarter of 2012 to 49.0 per cent.

During the month of March 2013 the United States of America (USA) remained Jamaica’s main trading partner with US$226 million or 37 per cent of imports originating from that country. This brought the year-to-date imports from the USA to US$639 million. Approximately US$66.3 million or 50.9 per cent of total exports was sent to the USA in March 2013 bringing the year-to-date exports to US$248 million. At the end of the first quarter of 2013, Jamaica incurred a trade balance with the USA of S$391 million down from US$403 million in the first quarter of 2012.

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Gov’t raking in taxes

July 1, 2013 by

Government is doing very well so far for this fiscal year. They collected a billion dollars more for the month of May, while  the deficit for April came in less than $1.5 billion originally reported.  The April deficit has now dropped to $884 million in the latest report from the Ministry of Finance.

The original deficit for April was projected at $3.5 billion making the actual out turn far better than planned as spending on interest cost was down amongst other areas of expenditure. The latest data released for May shows that revenues that were initially reported to be on par with budget when the April figures were first released is now up by $620 million more than planned. The April out turn for revenues is up by 11.7 percent and May is 13 percent up over intake for the same months last year.

Graph_arrow_up150x150The data for May show that taxes on local production & consumption climbed by a massive 19.44 percent or $1.75 billion above plan. However, the $1.2 billion increase in expenditure came from $1 billion more spent on interest payment, $400 million saved on wages and $600 million more spent on programmes.

The improved revenue in May was aided by a near billion dollar increase in special consumption tax on locally produced goods, improvement in motor vehicle license, accommodation, telephone taxes, $500 million improvement in local GCT, $300 million more each in stamp duty and travel taxes, offset by poorer performance in special consumption taxes for imports amounting to $540 million, $700 million drop in PAYE and $200 million in education tax. Company profit taxes performed better in April and May that budgeted.

The year-to-date deficit is provisionally put at $4.1 billion or $2.3 billion better than forecast.

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