Itaú BBA - Campos Neto signals continuity at the BCB

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Campos Neto signals continuity at the BCB

February 27, 2019

His speech focused on creating a sense of continuity, praising both the work done by the current administration

Talk of the Day


Roberto Campos Neto spoke at his confirmation hearing in the Senate’s Economic Affairs Committee and was approved by the House to take place as the new governor of the BCB, replacing Ilan Goldfajn. His speech focused on creating a sense of continuity, praising both the work done by the current administration in the microeconomic agenda and also the caution, serenity and perseverance in the conduct of the monetary policy. Bruno Serra Fernandes and João Pinho de Mello were also approved by the Committee to step in as directors of the Central Bank. They will attend the next Copom monetary policy meeting, scheduled for March 19th and 20th.

On activity indicators, FGV released its monthly surveys for industry and retail, showing ambiguous results and reinforcing other signals that suggest weak growth in early 2019. Business confidence in the industrial sector rose 0.8pp to 99.0 in February. Despite the increase, the indicator remains below 1H18 levels. On retail, confidence plummeted in the period, dropping 3.7%. The decline came from both current conditions (-1.5%) and expectations (-5.4%).

According to FGV, confidence within the services sector fell 1.7% in February to 96.5, the first drop after four consecutive increases. The drop was driven mainly by expectations (-4.2%), while current conditions rose 1.5%.

Day ahead: January’s PNAD national unemployment rate will come out at 9:00 AM, for which we forecast a 0.4 p.p. increase to 12.0% (stable at 12.3%, seasonally adjusted). Additionally, January’s Central Bank credit report release was rescheduled for today, at 10:30 AM. Finally, January’s central government budget balance is also expected to be released, for which we forecast a BRL 31.8 billion surplus.


Retail sales annual growth rate was substantially below market expectations. Retails sales fell by 1.3% yoy in December (from 3.4% in November), below our forecast (3.3%) and median market expectations (2.7%). The results could have been influenced by gasoline shortages (started the last week of December in some states of Mexico), which in turn is reflected in headline retail sales directly due to lower gasoline sales and indirectly as access to stores become more difficult. Moreover, the result is consistent with the weak monthly GDP proxy from December (0.04% yoy, from 1.8% in November), in particular the services index, which posted a growth rate of 1.0% yoy in December (from 3.1% in November). According to calendar-adjusted data reported by the statistics institute (INEGI), retail sales decreased 1.0% y oy in De cember (from 3.2% in November), taking the 4Q18 growth rate to 1.3% yoy (from 4.2% in the 3Q18).

At the margin, retail sales weakened sharply in the 4Q18. Using seasonally-adjusted figures, retail sales decreased 3.2% mom in December (from 0.3% in November), taking the qoq annualized growth rate to -7.4% in the 4Q18 (from 2.8% in the 3Q18).

We expect private consumption growth rate to moderate its pace in 2019 (relative to 2018), as the U.S. deceleration and uncertainties facing the economy curb GDP growth, although we acknowledge that one-off factors were partly behind the weakness in December’s consumption and will likely affect numbers for early 2019.
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Day ahead: At 11:00 AM, INEGI will announce January’s unemployment rate and trade balance of the same period. We expect the unemployment rate to come in at 3.4%. At 3:00 PM, Banxico will publish the quarterly inflation report (4Q18).


Day ahead: At 4:00 PM, the INDEC will publish the EMAE (official monthly GDP proxy) for December. Our forecast for 2018 is an economic contraction of 2.2%. 


Day ahead: Think-tank Fedesarrollo will publish industrial and retail confidence for January.

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