Central Bank: 27% increase in retrenchments

Unilever Caribbean Ltd workers during a protest at the company in Champs Fleurs on December 6. Some 178 workers will be on the breadline when Unilever starts its retrenchment process on January 17. - Ayanna Kinsale
Unilever Caribbean Ltd workers during a protest at the company in Champs Fleurs on December 6. Some 178 workers will be on the breadline when Unilever starts its retrenchment process on January 17. - Ayanna Kinsale

The Central Bank has maintained the repo rate at five per cent, amidst a backdrop of domestic deceleration, noticeably in the labour force where 27 per cent more people were retrenched this year, compared to 2018.

The bank released its quarterly Monetary Policy Report on Friday.

In the third quarter of 2019 natural gas production increased to 3,604 million cubic feet per day (mmcf/d), 3.7 per cent above output in the same quarter of 2018, despite maintenance shutdowns at two large natural gas platforms. This spurred year-on-year increases in petrochemicals (23.3 per cent) and liquefied natural gas (8.0 per cent). At the same time, crude oil production remained at its level of just under 60,000 barrels per day during the first half of the year, compared with a daily average of around 64,000 barrels in calendar 2018, a reflection of the ongoing maturation of the oil fields.

In the non-energy sectors, preliminary data for indicators monitored by the Central Bank point to modest expansions in the distribution and finance sectors during the third quarter. An uptick in local sales of cement suggests that construction activity is responding to the rise in public sector infrastructural investments.

According to data from the Central Statistical Office, headline inflation slowed to 0.3 per cent in the 12 months to November 2019, with core inflation (which excludes food prices) also decelerating to 0.6 per cent. Meanwhile, the food sub-index as a whole registered a year-on- year decline of -1.1 per cent in November, reflecting reductions in the measured prices of vegetable items in the Index. On the labour front, the Ministry of Labour and Small Enterprise Development reported that the number of people retrenched during January to October rose by 27 per cent year-on-year.

Private sector credit slowed to 4.3 per cent in September (year-on-year) compared with 4.5 per cent in July. Business credit deepened to 5.5 per cent but consumer credit, driven by debt consolidation and refinancing, grew by 5.9 per cent, while real estate mortgage loan growth accelerated to 10.9 per cent.

Commercial banks’ daily excess reserves at the Central Bank (an indicator of liquidity) averaged around $5.5 billion in November. The Central Bank’s liquidity management operations have balanced the public sector’s financing requirements with prevailing credit and inflationary conditions. The bank is still monitoring the interest rate differential between US and TT interest rates (rate of returns on investments).

The interest rate gap between three-month TT and US treasury securities has remained negative, but narrowed to -51 basis points at the end of November, due in part to the Central Bank raising the repo rate and the US Federal Reserve cutting its rates. The Central Bank maintained its fortnightly sales of foreign currency to authorised dealers and official international reserves were US$6.93 billion at the end of November 2019, or down US$640 million since the start of the year.

“The Monetary Policy Committee (MPC) considered the shifting external conditions, especially on the trade and geopolitical fronts. Domestically, available indicators suggest that while there remains room for macroeconomic policy support towards a durable economic recovery, external balance has not yet been restored,” the bank said.

The next Monetary Policy Announcement is scheduled for March 27, 2020.

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