Itaú BBA - Evening Edition – Stronger-than-expected retail sales in Brazil

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Evening Edition – Stronger-than-expected retail sales in Brazil

January 15, 2019

Going forward, we expect growth to accelerate, prompted by more expansive financial conditions

Talk of the day


Core retail sales increased 2.9% in November, printing significantly above the median of market estimates (1.0%) and our call (0.9%). The increase was likely influenced by Black Friday promotions, a driver that was not entirely captured by forecasts. Broad retail sales (including vehicles and construction material) climbed 1.5% during the month and also topped expectations (median: 0.6%; our call: 0.7%). For the time being, we forecast a slight decline in seasonally-adjusted core and broad retail sales volumes in December, due to normalization after the temporary effect of promotions. Going forward, we expect growth to accelerate, prompted by more expansive financial conditions. Importantly, such improvement depends on the approval of reforms.
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Tomorrow’s agenda: November’s Service Sector Survey (PMS) will be released at 9:00 AM (SP Time), for which we expect a 0.7% yoy increase.


Peru’s monthly GDP figure was above market expectations in November. The monthly GDP expanded 5.3% yoy (from 4.2% in October), close to our forecast (5.2%) and above market expectations (4.7%). As a result, the three-month moving average (3mma) growth rate reached 3.9% yoy in November (from 2.8% in October). 

We expect GDP to expand 3.8% in 2018. For 2019, we forecast a GDP growth of 4.0%, assuming that trade tensions dissipate (benefiting metal commodity prices and, consequently, investment), and a still expansionary monetary policy, which would offset lower fiscal impulse. The main risk to our macro outlook is the possibility of a further escalation in the trade dispute between the U.S. and China (Peru’s top two trading partners).
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Tomorrow’s agenda: Think-tank Fedesarrollo will release its consumer confidence index for December. Consumer confidence in November registered the lowest level since March 2017, and was the lowest recording for the month amid the advancement of tax reform plans that initially (before revisions) planned to raise VAT on the sale of food staples. Consumer sentiment came in at -19.6%, a significant fall from -10.0% the same period last year. The retreat from November 2017 was mainly explained by consumers’ one year expectations. With final version of the tax reform not being as harsh on consumers as initially thought, confidence may recover in coming months (particularly as inflation stays low and monetary policy remains expansionary), aiding activity recovery next year.

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