Inflation rises in November: Inflation reached to 3.1%YoY in November from 1.7% recorded in October 2015. Annual average inflation increased to 0.9% in November 2015. Monthly CCPI increased by 1.4% from October to November 2015 mainly caused by the increase in items in the food category including most varieties of vegetables, green chilies and limes. However, prices of chicken, eggs, papaw and mangoes decreased during the month. Within the non-food category, prices in Housing, Water, Electricity, Gas and other Fuels sub category increased while prices in the Clothing and Footwear category declined during the month.
Introduction of NCPI: The Department of Census and Statistics released National Consumer Price Index (NCPI: Base 2013=100) in November 2015 which includes weights based on consumer spending in 2012/2013. The new index is compiled using prices collected from all nine provinces in Sri Lanka. Further it has a larger consumption basket than CCPI containing 105 sub classes of goods and services categorized in to 12 groups. A salient feature of NCPI is inclusion of alcoholic beverages, tobacco and narcotics as an expenditure item complying with international best practices. Inflation, as measured by the change in the NCPI was recorded as 3.0%YoY in October 2015.
Exports contract in September
Trade deficit contracts further: The deficit in the trade account contracted by 4.1% to USD 733mn in September 2015 compared to USD 765mn in September 2014. On a cumulative basis, trade deficit during the first nine months of 2015 increased by 3.8% to USD 6,145mn.
Export earnings dropped by 5.9%YoY to USD 850mn in September 2015. The lower earnings from industrial exports (-4.7%) led by subdued performance of rubber products, gems, diamonds and jewellery, machinery and mechanical appliances and printing industry products, contributed to the overall decline in exports. Earnings from agricultural exports in September 2015 declined by 11.3%YoY, mainly due to significant declines tea and sea food exports. Cumulatively, earnings from exports declined by 3.7% to USD 7,996.1mn during the first nine months of the year.
Expenditure on imports decreased by 5.1% YoY, to USD 1,583mn in September 2015. The largest contribution for this decline came from investment goods (-16.1%) due to 47.9% decline in transport equipment, followed by intermediate goods (-4.8%). However, import expenditure on wheat and maize, fertiliser and mineral products, which are categorized under intermediate goods increased significantly. Cumulatively, expenditure on imports during the first nine months of 2015 decreased by 0.6% to USD 14,141mn.
Current policy rates to be maintained
Credit to Services and Industry sectors accelerates: Credit granted to the private sector by commercial banks increased by 22.2% in September 2015 from 21.3% in August 2015. As per the Quarterly Survey of Commercial Banks’ Loans and Advances to the Private Sector, the Services and Industry sectors witnessed the highest intake of credit, recording
increases of 40.6%YoY and 24.5%YoY, respectively. Broad money supply (M2b) accelerated to 16.0%YoY in September 2015, compared to 16.8% recorded in the previous month driven by the expansion of credit extended to private and public sectors by the banking system. Monetary Board in the view that the current monetary policy stance is appropriate, decided to maintain Deposit and Lending rates unchanged at 6.00% and 7.50% respectively.
Tourist arrivals in November grows 20.4%YoY
Arrivals rise YTD: Sri Lanka’s tourist arrivals rose to 144,147 in November 2015 (+20.4% YoY) driven by continued rapid growth of tourist arrivals from South Asia (+32.7%), East Asia (+30.9%) and Western Europe (+11.4%). The total number of visitors YTD were up 18.1% to 1,592,266 from 2014. From South Asia, tourists from India and Bangladesh increased significantly, up by 48.4% and 39.4% YoY respectively. From East Asia Chinese tourists continued to record the highest number (+54.7% YoY). 3Tourists from North America, Latin America and the Caribbean, Africa and Australasia increased by 23.0%, 8.1%, 16.9% and 7.4% YoY respectively.
Continued buying pressure pushes yields down
Skewed Yields curve further adjusts: Positive sentiment from USD 1.5 Bn Sovereign Bond saw improved confidence levels among fixed income investors boosting buying interest across the board. Short to mid-term yields dropped by 50 basis points while the longer tenor bond yields dipped by 80-100 basis points.
Global News
Weaker global growth has BoE holding main rate: The Bank of England has maintained its benchmark interest rate at a record low of 0.5%. Governor Mark Carney cites slowing growth in China and other emerging markets. The central bank’s inflation report says "the outlook for global growth has weakened since August."
Export earnings dropped by 5.9%YoY to USD 850mn in September 2015. The lower earnings from industrial exports (-4.7%) led by subdued performance of rubber products, gems, diamonds and jewellery, machinery and mechanical appliances and printing industry products, contributed to the overall decline in exports. Earnings from agricultural exports in September 2015 declined by 11.3%YoY, mainly due to significant declines tea and sea food exports. Cumulatively, earnings from exports declined by 3.7% to USD 7,996.1mn during the first nine months of the year.
Expenditure on imports decreased by 5.1% YoY, to USD 1,583mn in September 2015. The largest contribution for this decline came from investment goods (-16.1%) due to 47.9% decline in transport equipment, followed by intermediate goods (-4.8%). However, import expenditure on wheat and maize, fertiliser and mineral products, which are categorized under intermediate goods increased significantly. Cumulatively, expenditure on imports during the first nine months of 2015 decreased by 0.6% to USD 14,141mn.
Current policy rates to be maintained
Credit to Services and Industry sectors accelerates: Credit granted to the private sector by commercial banks increased by 22.2% in September 2015 from 21.3% in August 2015. As per the Quarterly Survey of Commercial Banks’ Loans and Advances to the Private Sector, the Services and Industry sectors witnessed the highest intake of credit, recording
increases of 40.6%YoY and 24.5%YoY, respectively. Broad money supply (M2b) accelerated to 16.0%YoY in September 2015, compared to 16.8% recorded in the previous month driven by the expansion of credit extended to private and public sectors by the banking system. Monetary Board in the view that the current monetary policy stance is appropriate, decided to maintain Deposit and Lending rates unchanged at 6.00% and 7.50% respectively.
Tourist arrivals in November grows 20.4%YoY
Arrivals rise YTD: Sri Lanka’s tourist arrivals rose to 144,147 in November 2015 (+20.4% YoY) driven by continued rapid growth of tourist arrivals from South Asia (+32.7%), East Asia (+30.9%) and Western Europe (+11.4%). The total number of visitors YTD were up 18.1% to 1,592,266 from 2014. From South Asia, tourists from India and Bangladesh increased significantly, up by 48.4% and 39.4% YoY respectively. From East Asia Chinese tourists continued to record the highest number (+54.7% YoY). 3Tourists from North America, Latin America and the Caribbean, Africa and Australasia increased by 23.0%, 8.1%, 16.9% and 7.4% YoY respectively.
Continued buying pressure pushes yields down
Skewed Yields curve further adjusts: Positive sentiment from USD 1.5 Bn Sovereign Bond saw improved confidence levels among fixed income investors boosting buying interest across the board. Short to mid-term yields dropped by 50 basis points while the longer tenor bond yields dipped by 80-100 basis points.
Global News
Weaker global growth has BoE holding main rate: The Bank of England has maintained its benchmark interest rate at a record low of 0.5%. Governor Mark Carney cites slowing growth in China and other emerging markets. The central bank’s inflation report says "the outlook for global growth has weakened since August."
(Source: www.thetelegram.com)
US initial unemployment claims increase: First-time jobless claims in the US increased by 16,000 last week, to 276,000, the Labor Department said. It was the biggest number in five weeks, but continuing claims for benefits remained at their lowest level since 1973.
(Source: www.bloomberg.com)
Japanese inflation down for third month: Consumer prices eased 0.1% in Japan, and core prices were down as well in October from a year before, the Internal Affairs Ministry reported. The latest results mark the third month of falling prices.
(Source: www.business-standard.com)
FDI in Philippines rises in August: Foreign direct investment in the Philippines picked up in August with a 76.3% year-over-year gain to US$526 million. The surge came largely in the form of loans by foreign companies to their Philippine-based units. For the year through August, FDI inflows totaled US$3.004 billion, down 27.1% from a year before.
US initial unemployment claims increase: First-time jobless claims in the US increased by 16,000 last week, to 276,000, the Labor Department said. It was the biggest number in five weeks, but continuing claims for benefits remained at their lowest level since 1973.
(Source: www.bloomberg.com)
Japanese inflation down for third month: Consumer prices eased 0.1% in Japan, and core prices were down as well in October from a year before, the Internal Affairs Ministry reported. The latest results mark the third month of falling prices.
(Source: www.business-standard.com)
FDI in Philippines rises in August: Foreign direct investment in the Philippines picked up in August with a 76.3% year-over-year gain to US$526 million. The surge came largely in the form of loans by foreign companies to their Philippine-based units. For the year through August, FDI inflows totaled US$3.004 billion, down 27.1% from a year before.
(Source: www.bworldonline.com)
IMF official: Global monetary uncertainty won’t end with Fed rate increase: The Federal Reserve has been helpful by making it clear it plans to increase interest rates slowly. But there will still be some uncertainty about US monetary policy, said Maurice Obstfeld, director of research for the International Monetary Fund. The threat of deflation is his top concern.
IMF official: Global monetary uncertainty won’t end with Fed rate increase: The Federal Reserve has been helpful by making it clear it plans to increase interest rates slowly. But there will still be some uncertainty about US monetary policy, said Maurice Obstfeld, director of research for the International Monetary Fund. The threat of deflation is his top concern.
(Source: mninews.marketnews.com)
Eurozone’s core inflation warms up: Some pressure on the European Central Bank for sharp new stimulus may be relieved as core inflation in the eurozone registered just above 1% in October. The test now will be whether the gains can be sustained.
(Source: www.bloomberg.com)
India’s manufacturing PMI slips, but other signs point up: The Nikkei purchasing managers’ index for India’s manufacturing fell back to 50.7 last month from 51.2 in September — the worst reading in 22 months. However, hiring in the sector was up, and there were signs of rising inflation, factors that may signal the central bank to suspend monetary easing.
(Source: www.business-standard.com)
- First Capital Research
Eurozone’s core inflation warms up: Some pressure on the European Central Bank for sharp new stimulus may be relieved as core inflation in the eurozone registered just above 1% in October. The test now will be whether the gains can be sustained.
(Source: www.bloomberg.com)
India’s manufacturing PMI slips, but other signs point up: The Nikkei purchasing managers’ index for India’s manufacturing fell back to 50.7 last month from 51.2 in September — the worst reading in 22 months. However, hiring in the sector was up, and there were signs of rising inflation, factors that may signal the central bank to suspend monetary easing.
(Source: www.business-standard.com)
- First Capital Research
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