Itaú BBA - Evening Edition – Brazil’s government approval rate remains broadly stable in April

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Evening Edition – Brazil’s government approval rate remains broadly stable in April

April 24, 2019

The poll surveyed 2000 participants between April 12th and 15th.

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Jair Bolsonaro’s administration approval rate (good + excellent) remained virtually stable at 35% in April (from 34% in the previous month), according to the latest IBOPE survey. The disapproval rate in the same period reached 27% (from 24% in March). 7% of the respondents didn’t know/didn’t answered. The survey on the president’s way of governing points to an approval rate of 51% (same level as in March), while 40% disapproves it (from 38%). 9% of the respondents didn’t know/didn’t answered the survey. The poll surveyed 2000 participants between April 12th and 15th.

On activity indicators, CAGED (formal job creation) registered a net destruction of 43k jobs in March, well below our call (+44k) and the market’s (+80k). Seasonally-adjusted, 8k formal jobs were destroyed in the month, slowing the 3-month moving average to 16k (from 31k in the previous month). The sectoral breakdown shows gains in services and retail sectors, while construction registered a decline in the period. All in all, the labor market continues to face sluggishness in early 2019, consistent with other activity indicators.

Tax collection came in at BRL 110 bn in March, slightly below our call (BRL 112.7 bn) and the market’s (BRL 114 bn). The indicator declined 0.6% yoy in real terms in the month. The revenue related to corporate profits increased 2.1% yoy in March, after a strong monthly performance in February (37.5% yoy in real terms). In the same direction, revenues related to consumption increased 2.4% yoy, while revenues related to wages bill remained virtually flat (+0.2% yoy in real terms). Excluding revenues from the REFIS/PRT, tax collection remained flat in March (in real year-over-year terms), with the 3-month moving average stable at 3.7% – still at a good pace, but representing some weakening if compared to recent months.

Lower House lawmakers approved the government’s proposal for the pension reform at the Constitutional and Justice Committee yesterday. 48 members voted in favor of the report, of a total of 66 representatives. The proposal will now head to a Special Committee at the Lower House, where it can be debated for a minimum of 10 and a maximum of 40 sessions.

Tomorrow’s Agenda: FGV’s consumer confidence index for April will see the light at 8:00 AM. On the inflation side, April’s IPCA-15 mid-month inflation will be released at 9:00 AM. We expect a 0.69% increase in the period, which would accelerate the accumulated inflation in 12 months to 4.68% (from 4.18%). March’s data regarding the external accounts will be released at 10:30 AM. We expect the current account to post a $500 million surplus in March 2019, above the $666 million deficit seen in the same month of 2018. Direct investment in the country will likely amount to USD 7.3 billion in March, leading the 12-month reading to USD 89 billion (4.7% of GDP). 


CPI surprised to the upside in the first half of April, pressured by tourism services and airfares. Mexico’s CPI posted a bi-weekly rate of -0.03% in the first half of April (from -0.35% a year ago), below our forecast (-0.19%) and median market expectations (-0.18%). Inflation was pressured by core CPI (0.40%, from 0.07% a year ago), mainly due to an increase in services prices (0.52%, from -0.11% a year ago), associated to a price rise of tourism services and airfares due to Easter holidays. Headline inflation accelerated on an annual basis to 4.38% in the first half of April (from 4.06% in the 2H of March), above the upper bound of the range around central bank’s target, with core CPI increasing to 3.94% (from 3.60%). Headline and core inflation also accelerated at the margin. Assuming bi-weekly inflation in line with the 10-year median variation in the second half of April, we estimate that seasonally-adjusted three-month annualized inflation stood at 2.85% in the month (from 0.35% in March) for the CPI and 3.82% (from 2.76% in March) for the core index.

We expect inflation to end 2019 at 3.6%. Although inflation accelerated sharply, it was partly due to a hike of tourism related services due to Easter Holidays, an effect that should fade away in the coming figure. However, the lingering uncertainties surrounding Mexico’s economy continue to constitute upside risks for inflation (through a weaker currency).
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Tomorrow’s Agenda: At 10:00 AM, the statistics institute (INEGI) will announce February’s retail sales. We estimate that retail sales grew 0.6% yoy, from 0.9% in January.


Argentina’s trade balance came in with a significant surplus in March. The trade surplus reached USD 1.2 billion in the period, compared with a deficit of USD 0.5 billion in the same month of 2018. The surplus was significantly above the market consensus and our forecast, both at USD 0.5 billion. The 12-month trade balance entered positive territory with a surplus of USD 0.6 billion in March, from a deficit of USD 1.2 billion in the previous month. At the margin, the three-month cumulative and annualized surplus was USD 9.7 billion, up from USD 9.4 billion in the quarter ended in February. The decline in imports deepened in March, both on year-over-year basis and on a sequential basis. The 33.7% yoy decline in total imports was significant across all sectors. The decline in exports was also widespread, but led by non-agricultural products. Total exports decreased by 5.0% yoy in March (+0.7% mom/sa). Rapid adjustment of external accounts was led by weak currency and reduced internal demand. We forecast a trade surplus of USD 5.5 billion for 2019 (from a USD 3.8 deficit last year) and a major narrowing of the current account deficit, to 1.2% of GDP (down from 5.4% in 2018).


Tomorrow’s Agenda: Think-tank Fedesarrollo will publish industrial and retail confidence for March on Thursday. In the previous month, both industrial and retail confidence remained upbeat, a favorable development for the economic activity ahead.

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