Itaú BBA - Evening Edition – Industrial production declines in Brazil

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Evening Edition – Industrial production declines in Brazil

July 2, 2019

Industrial production declined 0.2% mom/sa in May.

Talk of the Day

Brazil

Industrial production declined 0.2% mom/sa in May, above our forecast (-0.6% mom/sa) and virtually in line with the median of market expectations (-0.3% mom/sa). In year-over-year terms, production soared 7.2%, also better than our call (6.5%) and the market’s (6.9%), after a sharp slide in May 2018, driven by the truckers’ stoppages. After this result, our GDP tracking for 2Q19 increased slightly, to 0.3% qoq/sa (from 0.2% previously). In our view, several factors – not necessarily exclusive – may explain the weakness in the industrial sector (and the overall economy). We understand that (i), in recent years, the real neutral interest rate receded due to the adoption of a more austere fiscal policy and restraints on credit subsidies; (ii) uncertainties surrounding fiscal reforms, particularly the pension reform, are possibly inhibiting capital investments; and (iii) the slowing pace of global growth is negatively impacting output. ** Full story here.

According to Fenabrave, vehicle sales reached 223k in June, rising 2.8% mom/sa. Compared to the same month of 2018, sales increased 10.5%. The breakdown shows a 3.1% increase in passenger cars + light vehicles, and a 2.5% decline in trucks + buses. This number is important for our June’s retail sales forecast, which now stands at +0.5% mom/sa for the core index and stability for the broad one, which includes vehicles and construction material. Our forecast for June’s auto production (Anfavea), to be released this Thursday, is a 0.5% mom/sa decline (234k units).

According to ABRAS, supermarket sales increased 1.0% mom/sa in May. This number is important for our May’s retail sales forecast, which now stands at +0.2% mom/sa for the core index and +0.4% for the broad one, which includes vehicles and construction material.

Chile

Tomorrow’s Agenda: At 10:00 AM, INE will publish the private consumption activity indicators for May. Despite the still-low consumer sentiment and falling new car sales, we expect retail sales growth to improve to 1.0% yoy (from -0.8% yoy in April), temporarily boosted by seasonal promotions.

Colombia

Tomorrow’s Agenda: The institute of statistics (DANE) will publish exports for the month of May at 12:00 PM, which we expect to come in at USD 4.0 billion, a 7.5% yoy rise, boosted by oil exports and some coal recovery.

Argentina

Tomorrow’s Agenda: The car-makers association (ADEFA) will release June’s data on production, exports and domestic sales to car dealers.



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