Deon McLennon, Contributor
MCLENNON
FROM AN analysis of the chart of leading economic indicators, a relatively liquid money market, the T-bill auction results remain aligned with the Bank of Jamaica yield curve.
July's auction was the first time since the beginning of the year that the T-bill yield increased. The amount applied for was $617 million, the lowest subscription rate since the beginning of the year.
Since May, there have been no further rate cuts. With inflation and rising interest rates overseas, further rate cuts are unlikely in the near future.
The CPI was 1.6 per cent in July (point to point: 18.2 per cent). The 'food and drink' group, which represents 56 per cent of the CPI, registered an increase of 2.2 per cent.
The main contributors to this upward movement were increased prices for items in the sub-groups 'starchy foods' and 'vegetable and fruits'. The fuel category also recorded strong price movements due to volatile price swings on the world oil market.
For the first three months of the fiscal year, the fiscal deficit was $800 million better than expected. This was due to recurrent expenditure being $1.5 billion less than budgeted, which helped to mitigate the impact of revenues being less than projected.
All areas of recurrent expenditure except 'programmes', were less than budgeted, especially domestic interest payments that were lower by $588 million followed by wages and salaries $576 million. Although the primary surplus was $41 million less than budgeted, it remains strong at $10.6 billion.
This fact reassures rating agencies and the country's external creditors. Of increasing interest will be the rate of growth of revenue sources such as the bauxite levy and tax on other companies.
Of special note is that tax receipts from international trade have exceeded its budget in the month of June. With increased importation in July due to two hurricanes, it is expected to surpass its budget once again.
The Net International Reserves remain very healthy, representing just over 19 weeks of imports of goods and services.
CURRENT ACCOUNT DEFICIT
Total tourist arrivals for the first half of the year were up by 1.5 per cent compared to 2004. Stopover arrivals increased by 3.4 per cent, while cruise ship visitors rose by 4.4 per cent.
Cruise ship passengers accounted for 46 per cent of arrivals.
The current account recorded a deficit of US$28.4 million for April 2005, compared to the surplus of US$27.1 million recorded for April 2004.
Imports increased by US$80.5 million, whereby oil and mineral fuels accounted for almost a quarter of the increase in imports with miscellaneous manufactured goods being the other major contributor.
With Petrojam resuming operations, savings in refined oil will soon begin to materialise.
The value of exports increased due to a 6.1 per cent and 5.1 per cent increase in the price and volume of alumina, respectively.
There was a reduction in the surplus earned from services due to increased freight payments and higher charges for financial services and insurance premiums.
The deficit in the income account also widened as a result of an expansion of US$22.4 million in net investment income outflows as foreign companies remitted profits and Government made interest payments on external debt.
U.S dollar deposits in the banking system rose to US$1.9 billion, an increase of US$117 million when compared to May 2004.
The country's internal debt stood at $466 billion at May 2005, up $46 billion from last year.
The country's external debt rose by US$223 million when compared to May 2004.
Pan Caribbean Financial Services Ltd.
