Itaú BBA - Retail sales below expectations in Brazil

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Retail sales below expectations in Brazil

May 10, 2019

The print reinforces our view of weak GDP growth in 1Q19.

Talk of the Day


Broad retail sales grew 1.1% seasonally-adjusted in March, weaker than market expectations (1.6%) and slightly below our forecast (1.2%), while  core retail sales advanced 0.3%, also below market expectations (0.9%) and our estimate (1.1%). Compared to the same period of 2018, core sales dropped 4.4%, while the broad segment fell 3.5%. The breakdown shows supermarket sales weaker than our forecast, while the vehicle component came in stronger than our estimate. These results reinforce our understanding that consumer spending sustained a moderate growth pace in 1Q19, but this move was probably offset by a reduction in investment. Our forecast for 1Q19 GDP remains at -0.2% qoq/sa. For the time being, we anticipate seasonally-adjusted declines in both retail sales indicators in April.
** Full story 

Day Ahead: April’s IPCA inflation will be released at 09:00 AM. We forecast a 0.63% monthly increase, leading the 12-month reading to 5.00% (from 4.58% in March). Once again, food at home and fuels will likely post the major upward contributions. 


The board of the central bank unanimously chose to leave the policy rate at 3.0% and signals steady rates ahead. The guidance included in the Inflation Report (IPoM) released just one month ago was for stable rates for at least two quarters (4Q19), before the resumption of the gradual normalization process. However, in this month’s press release, the board states that the required course for monetary normalization that would ensure inflation’s convergence to the target would be evaluated in the June 10 IPoM. While the overall assessment of the economic outlook remains broadly unchanged from the 1Q IPoM, rising external risks related to the trade dispute between China and the U.S. may be motivating additional caution within the board. 

Intensifying risks to global economic growth, along with still contained inflationary pressures and some widening of the output gap in 1Q19 indicate no need to remove stimulus in the near term. Moreover, risks are tilted to an even longer-than-anticipated period of stable rates.

Car sales continued to fall in April. The National Automotive Association of Chile (ANAC) reported that car sales decreased 7.5% yoy in April, a moderation relative to the 9.5% drop registered in March, but printing the third consecutive month of annual contraction. In the rolling quarter, sales disappointed as they fell 7.6%, following the 6.3% expansion in 4Q18 (-3.5% in 1Q19). At the margin, car sales increased 4.9% (seasonally adjusted) from March, but still contracted 3.0% qoq/saar, building on the 8.5% retreat in 4Q18. The moderation in car sales, alongside weak retail activity and low consumer sentiment, highlight risks to the consumption outlook. However, still low inflation and an expansionary monetary policy would support an activity firming this year.


Inflation stood at 0.05% mom in April (from -0.34% a year ago), broadly in line with our forecast and market expectations of 0.06%. Looking at the breakdown, core CPI increased to 3.87% (from 3.55%), mainly due to other core services prices (includes tourism related services and airfares). In turn, non-core CPI fell 1.15% (from -1.72% a year ago), mainly due to a decline in energy prices (-3.32%). Headline inflation accelerated to 4.41% yoy in April (from 4.00% in March), above the upper bound of the range around central bank’s target. We expect inflation to end 2019 at 3.6%. However, the lingering uncertainties surrounding Mexico’s economy continue to constitute upside risks for inflation.
** Full story here.

Day Ahead: At 10:00 AM, the Statistics Institute (INEGI) will publish March’s industrial production. We estimate industrial production decreased 0.6% yoy (from -0.8% in February).

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