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Evening Edition – Monthly GDP proxy increased in Brazil

January 17, 2019

Relative to the same month in 2017, the index rose 1.9%

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November’s IBC-Br Activity Index (the monthly GDP proxy) increased 0.3% mom/sa, between our call (0.4%) and the median of market expectations (0.2%). Relative to the same month in 2017, the index rose 1.9% (our call: 2.1%; consensus: 1.8%). The series was revised downwards by 0.1% since Jun-18.

Notwithstanding the monthly increase, the IBC-Br decelerated on a quarterly basis (from 1.9% in October to 0.5% in November), after the period during which the base effect was impacted by the truckers’ stoppages. In our view, such weakness, particularly in the industrial sector, is caused by the lagged effect of tighter financial conditions in 3Q18 combined with the slowdown in global growth – particularly in countries that are big buyers of Brazil’s manufactured items.


According to think-tank Fedesarrollo, consumer confidence partially recovered from the sharp drop into pessimistic ground in November. Consumers remain downbeat at -8.3%, (0 = neutral), but less so than the -19.6% in November (the lowest level since March 2017). At the margin, there was a recovery in nearly all areas, with the expectations that households would be better off in one-year’s time (+1.1% vs. -18.3% in November). This improvement is likely explained by the tax reform not being as harsh on consumers as initially thought (following the exclusion of a VAT hike to basic foodstuffs). Compared to the end of 2017 (-6.0%), consumer confidence still retreated, mainly explained by less favorable views on expectations (from -5.1% to -11.1%). Going forward, stable inflation and mildly expansionary monetary policy would likely support private confidence, aiding an activity recovery this year to 3.3% from 2.6% expected in 2018.

Tomorrow’s agenda: Activity indicators for the month of November will be published at 1:00 PM (SP Time). In October, the activity recovery advanced with retail sales and manufacturing surprising to the upside. Retail sales increased 6.5% in October (from 5.9% in September), lifted by car and motorcycle sales. The 5.8% manufacturing rise in October (2.9% previously) with oil refining contributing favorably. For November, we expect industrial production to rise a still firm 5.0% yoy, while strong auto sales in the month point at still robust retail sales growth of 6.8% in 12 months, aided overall by low inflation, an expansionary monetary policy, albeit lower confidence could be a drag.

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