Itaú BBA - Evening Edition – Retail sales temporary boost in Chile

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Evening Edition – Retail sales temporary boost in Chile

July 3, 2019

For 2019, we see GDP growth of 2.4%, down from 4% in 2018

Talk of the Day


May’s retail sales (including vehicles) increased 3.3% yoy (-0.7% in April), above both the market consensus and our 1.0% growth forecast. The pickup, however, may be transitory, as promotional events (cyber day/week) and a favorable base of comparison likely boosted activity. Meanwhile, wholesale trade continued to drive commercial activity, as sales of investment-linked materials (machinery, equipment and construction materials) remain elevated. At the margin, retail activity improved as sales (including vehicles) increased 1.9% from April, resulting in growth of 4.0% qoq/saar, following a strong 4.9% decline in 1Q19. Overall, the bounce back of retail activity and manufacturing in the month is likely to be partly offset by surprisingly weak mining activity, resulting in another below potential Imacec print (monthly GDP proxy) of 2.3% in May (2.1% in April). With consumer sentiment entrenched in pessimistic territory amid uninspiring labor market developments, retail activity is unlikely to sustain an elevated rebound. For 2019, we see GDP growth of 2.4%, down from 4% in 2018. ** Full story here.


All eyes remain focused on the pension reform’s special committee. Local news indicate that the party leaders are still trying to reach an agreement, which is essential for the rapporteur of the reform, Samuel Moreira, to present a new supplementary proposal with further changes. The proposal then may be voted at the committee. As we approach the legislative break (July 17-31), it will be important to monitor how these next steps will evolve, in order to gauge the timing of the first Lower House floor vote.

Tomorrow’s Agenda: June’s Anfavea auto production data will be released tomorrow.


Export growth slowed in May, as oil exports were hampered by slower volume growth and falling prices. Total exports increased 1.2% yoy (2.0% in April; 10.2% in 2018), reflecting the effects of slowing global growth. Oil exports contracted 2.0% (+21.8% in April; 26.6% in 2018), while coffee exports dropped 26.4%, the sharpest decline since July 2018. Supporting export growth in the month was the 30.0% coal rise (-24.7% previously), favored by a low base of comparison. In the quarter ending in May, exports expanded a mild 0.9% (1.3% decline in 1Q19), despite oil exports expanding 12.9% (4.5% in 1Q19). At the margin, exports increased 29.3% qoq/saar, up from 0.3% in 1Q19, as the acceleration of oil and coal exports was only partly offset by slowing coffee exports. A more challenging global scenario means Colombia’s external account imbalances would persist. We expect a current account deficit of 4.3% of GDP this year (3.9% in 2018).

The minutes of June’s monetary policy meeting, at which the board unanimously chose to hold the policy rate at 4.25%, reflect a scenario of stable rates. Growth dynamism is expected to pick up through the remainder of the year, inflation is seen returning to the 3% target in 2020 as transitory shocks unwind and external imbalances must be monitored. Nevertheless, we expect growth to disappoint, leading to a further widening of the output gap and limiting inflationary pressures that would justify rate cuts. Also favoring lower rates in Colombia is the global trend towards more easing, which would keep financial conditions favorable (mitigating external imbalance risks).

We believe that the central bank will cut the policy rate to 4.0% before yearend. A widening output gap, controlled inflation and loosening global financial conditions provide space for a more expansionary monetary policy. The next monetary policy decision will take place on July 26. ** Full story here.


Tomorrow’s Agenda: At 4:00 PM, manufacturing and construction data for May will be published. We expect to see another year-over-year drop in manufacturing (-8.9% in April).

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