Itaú BBA - Brazil’s retail sales rise in April and continue upward trend

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Brazil’s retail sales rise in April and continue upward trend

June 14, 2018

Nine out of 10 broad retail components posted seasonally-adjusted monthly increases in April.

Talk of the Day


Core retail sales went up 1.0% mom/sa in April, above the median of market expectations (0.6%) and near our estimate (0.9%). Compared to April 2017, core sales expanded 0.6%. The March reading was revised upward by 1.3 p.p. Broad retail sales climbed 1.3% mom/sa, printing between the median of market expectations (1.2%) and our call (1.7%). Compared to April 2017, broad retail sales grew 8.6%. The March result was revised upward by 0.9p.p. Both measures accelerated on a quarterly basis. Core retail sales advanced to 1.5% (in the quarter ended in April vs. the quarter ended in January) from 1.2% (in 1Q18 vs. 4Q17), while broad sales picked up to 2.2% from 1.9%.

Nine out of 10 broad retail components posted seasonally-adjusted monthly increases in April, showing that gains were widespread accross sectors. Coincident indicators out so far (vehicle sales, surveys with consumers and retail entrepreneurs, Serasa retail index, inquiries to credit protection service SCPC) indicate that core retail sales dropped 2.0% mom/sa in May, while broad sales tanked 3.5%, partly due to the cargo transportation stoppages.
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The Central Bank implemented yesterday an additional FX swap auction of up to 90,000 contracts. The currency finished the day valued at BRL 3.71/USD.

Weekly Elections Monitor: How does the main candidates’ current regional performance compare to that of past elections? We have analyzed regional polls to compare candidates’ current performance with that of past elections. Overall, the main candidates have lower voting intentions today than in past elections in most states. The presence of Jair Bolsonaro (PSL) in the 2018 race, as well as the high percentage of blank, null and undecided voters in current polls, explain most of the underperformance. The Datafolha voting intentions poll, carried out after the truck drivers' stoppage, showed a relatively unchanged scenario compared to previous polls. Monitor of economic policy signs: Most pre-candidates (except PT’s) participated in interviews promoted by Correio Braziliense last week. The candidates stated that they are not against privatizations, but mentioned Petrobrás, Banco do Brasil and Caixa Econômica as exceptions. They defended a tax simplification program and recognized the need for a social security reform.
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Day Ahead: April’s Service Sector Survey (PMS) will be released at 9:00 AM (SP Time). We expect a 2.3% yoy increase (consensus: 1.5%).


Day Ahead: The statistics agency (INDEC) will publish the National CPI for May at 4:00 PM (SP Time). We estimate inflation at 2.8% mom (consensus: 1.5%).


As expected, the board of the central bank voted unanimously to keep the policy rate at 2.5%. The press release now holds a neutral stance after gradually shedding the easing bias over the last few months. Specifically, risks to inflation converging to the 3% target declined in the central bank's view (until the previous statement the board had been emphasizing the persistence of inflation at low levels as a risk for inflation convergence). The consolidation of the activity recovery, weakening of the Chilean peso and somewhat higher than expected inflation over the past few months (partly due to higher oil prices) have diminished the appeal of additional easing. Yet, the board remains at ease evaluating incoming data, noting that the monetary stimulus will stay aro und current levels (given the still present output gap) ahead of a normalization process once the inflation convergence process proceeds.

Day Ahead: The 2Q Inflation Report will be released at 9:30 AM (SP Time). We do not expect changes to the baseline scenario of stable rates until at least until the end of the year.

Macro Vision

2018 FIFA World Cup Russia™: Who has the greatest chances of winning? During the next few weeks, billions will direct their eyes toward Russia, the country hosting the 2018 World Cup. As in past tournaments, we did an exercise to estimate which national teams will likely stand out. We built our model on results for each match in past World Cups, starting in 1994. To estimate the probability of victory by a team in a given match, we considered factors such as current quality of players, tradition and fan support. Based on our model, we believe Brazil has the higher changes of winning, followed by Germany and Argentina.
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