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Milder-than-expected trade surplus in Chile

April 8, 2021

The benign external environment would be partially countered by improving domestic demand and higher oil prices

Talk of the Day

Chile

COVID-19 update: The latest official information from the Ministry of Health is that Chile registered a daily increase of 62 deaths (57 on the previous day) and 5,242 confirmed cases (from 5,168). The 7-day moving average of deaths increased to 94, from 90 on the previous day. The total number of deaths now stands at 23,796, with 1,043,022 confirmed cases, which implies a 2.3% mortality rate. The estimated reproduction rate (R) is currently at 0.80 (from 0.90). According to the latest figures provided by the Department of Statistics and Health Information, Chile has vaccinated about 37.2% of its population (around 7.1 million individuals).

Recovering domestic demand, amid still upbeat export dynamics, resulted in a milder trade surplus in March. The trade surplus was USD 0.5 billion, smaller than our call (USD 1.0 billion; market consensus: USD 1.1 billion), and far inferior to the USD 1.3 billion last year. The rolling-12-month trade surplus sits at USD 19.3 billion (USD 18.4 billion last year and USD 3.0 billion in 2019). At the margin, our own seasonal adjustment shows the trade balance surplus at a narrower USD 14.1 billion in 1Q21 (annualized), as imports continue to gain momentum across the board. Exports slowed to 29.3% yoy in March (42.2% previously) as agricultural sales declined and mining sales growth moderated. While partly favored by a low base of comparison, imports are recovering fast. Amid the payout of the second pension withdrawal (during December and January in particular), and the announcement of an augmented fiscal rescue package, consumer goods imports are leading the recovery (+72.6% YoY in March; 16.2% drop in 2020). However, higher global oil prices are supporting gains in energy imports (+34.5%) and capital imports are also improving (+64.1%), lifted by machinery for mining and construction (as copper prices likely incentivize investment in the sector). The recovery of domestic demand and a rising income deficit would be only partly offset by favorable export dynamics. We see a return to a current account deficit of 1% this year, a turnaround from the 1.4% surplus last year. **Full story here.

The National Institute of Statistics (INE) reported nominal wages retreated 0.3% mom in February, the first monthly drop since May last year (-0.1% one year earlier). Yet, wages grew 4.1% over twelve months (+4.3% in January; +4.0% in 4Q20). Meanwhile, real wage growth accelerated to 1.3% yoy, the fastest pace in over one year (1.2% expansion in January), so growth in the rolling quarter was broadly stable at 1.2% (1.3% in 4Q20). Consequently, the contraction of the real wage bill moderated to 6.8% over twelve months in the quarter ended in February (-6.9% in 4Q20) when salaried employment is considered, while it improved to an 8.8% fall using total employment growth (-10.5% in 4Q20). As the vaccination program advances, favorable external conditions should support activity dynamics ahead, leading to a labor market recovery with employment and earnings gains.

Day Ahead: The national institute of statistics (INE) releases inflation for March at 9:00 AM (BRT). Rising fuel and food prices, as well as the seasonal educational price adjustment point to a month-over-month variation of 0.5% in March. As a result, annual inflation would edge back to the 3.0% target.

Mexico

COVID-19 update: According to the Johns Hopkins University, Mexico registered a daily increase of 603 deaths (252 on the previous day) and 4,675 confirmed cases (from 1,247). The 7-day moving average of deaths decreased to 338, from 368 on the previous day. The total number of deaths now stands at 205,002, with 2,256,380 confirmed cases, which implies a 9.1% mortality rate. The estimated reproduction rate (R) is currently at 0.61 (from 0.36). According to the latest figures provided by the Secretary of Health, Mexico has vaccinated about 6.5% of its population (around 8.4 million individuals).

The monthly Gross Fixed Investment Index (GFI) fell by 10.6% yoy in January, better than our forecast and market expectations, both at -12.5%. Using seasonally adjusted figures, GFI posted a solid 3.3% monthly growth, supported by both construction (2.9%) and machinery & equipment (4.2%). Still, GFI is 7.5% below pre-pandemic levels (February 2020). On another note, the monthly proxy for private consumption fell by 7.1% yoy in January (from -5.3% in December). Using seasonally adjusted figures, private consumption grew 1.0% mom, and is currently 5.7% below pre-pandemic levels. We expect GDP growth of 6.0% for 2021 benefited by external demand (U.S. economic activity). A delay in the COVID-19 vaccination campaign, which could postpone the easing of social distancing measures, is a downside risk to activity, while prevailing uncertainties over domestic policy direction are likely to curb internal demand. **Full story here.

Day Ahead: INEGI (the statistics institute) will publish the CPI corresponding to the full-month of March at 9:00 AM (BRT). We expect headline and core inflation at 0.83% mom and 0.55%, respectively. Assuming our forecast is correct, headline CPI would increase 4.67% yoy in March, while core CPI would reach 4.13% (from 4.87%). Additionally, Mexico’s Central Bank (Banxico) will publish the minutes of March’s monetary policy meeting (held two weeks ago) at 12:00 PM (BRT), in which Board members voted unanimously to keep the policy rate unchanged at 4.00%.

Brazil

COVID-19 update: The latest official information from the Ministry of Health is that Brazil registered a daily increase of 3,829 deaths (4,195 on the previous day) and 92,625 confirmed cases (from 86,979). The 7-day moving average of deaths decreased to 2,752, from 2,757 on the previous day. The total number of deaths now stands at 340,776, with 13,193,205 confirmed cases, which implies a 2.6% mortality rate. The estimated reproduction rate (R) is currently at 0.89 (from 0.87). According to state health departments figures, Brazil has vaccinated about 10.0% of its population (around 21.3 million individuals). See our weekly report here.

According to Anfavea, auto production reached 200k in March, better than our forecast, at 185k. In seasonally-adjusted terms (our estimates), production decreased 10.2% mom (our expectation: -25.0% mom/sa), leading to a 5.5% yoy increase. The decline at the margin is likely associated with stoppages in vehicle assembly lines, due to COVID-19 safety measures and lack of inputs.

Itaú Daily Activity Tracker: Due to technical issues, IDAT data regarding the past days is not available. See Tuesday’s report here.

Argentina

COVID-19 update: The latest official information from the Ministry of Health is that Argentina registered a daily increase of 198 deaths (163 on the previous day) and 22,039 confirmed cases (from 20,870). The 7-day moving average of deaths increased to 139, from 128 on the previous day. The total number of deaths now stands at 56,832, with 2,450,055 confirmed cases, which implies a 2.3% mortality rate. The estimated reproduction rate (R) is currently at 1.68 (from 1.39). According to the latest figures provided by the government, Argentina has vaccinated about 8.3% of its population (around 3.7 million individuals).

Day Ahead: Manufacturing and construction data for February will be released at 4:00 PM (BRT). According to coincident indicators, there were mixed signals in February on a sequential basis. The industrial index (IPI), published by OJF consulting firm, fell 5.5% mom/sa (-0.1% yoy), while construction activity, according to Grupo Construya, expanded 8.2% mom/sa (25.2% yoy).

Colombia

COVID-19 update: The latest official information from the Ministry of Health is that Colombia registered a daily increase of 231 deaths (199 on the previous day) and 11,827 confirmed cases (from 10,190). The 7-day moving average of deaths increased to 181, from 173 on the previous day. The total number of deaths now stands at 64,524, with 2,468,236 confirmed cases, which implies a 2.6% mortality rate. The estimated reproduction rate (R) is currently at 1.26 (from 1.21). According to the latest figures provided by the Ministry of Health, Colombia has vaccinated about 4.0% of its population (around 2.1 million individuals).

Day Ahead: Think-tank Fedesarrollo will publish consumer confidence for March during the day. Consumer sentiment remained deep in pessimistic ground in February, but returned to a recovery path after the significant retreat recorded in January. Consumer confidence came in at -14.6% (0 = neutral), 3.4 p.p. more pessimistic than the level recorded in February 2020, while up from -20.8% registered previously (cycle-low of -41.3% in April). With the vaccination program gathering steam during March, a continued sentiment improvement is likely.

Peru

COVID-19 update: The latest official information from the Ministry of Health is that Peru registered a daily increase of 273 deaths (261 on the previous day) and 8,384 confirmed cases (from 7,842). The 7-day moving average of deaths increased to 230, from 215 on the previous day. The total number of deaths now stands at 53,411, with 1,598,593 confirmed cases, which implies a 3.3% mortality rate. The estimated reproduction rate (R) is currently at 1.0 (from 0.89). According to the latest figures provided by the Ministry of Health, Peru has vaccinated about 1.8% of its population (around 580 thousand individuals).

Day Ahead: The Central Bank of Peru (BCRP) will announce its April monetary policy meeting at 8:00 PM (BRT). We expect the BCRP to keep its policy rate unchanged at 0.25%. Given limited underlying inflationary pressures, we expect the BCRP to keep the monetary policy rate at that level throughout this year.



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