Itaú BBA - Retail sales decelerate in Chile

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Retail sales decelerate in Chile

June 4, 2019

The increasingly complex external scenario is resulting in growing domestic uncertainty.

Talk of the Day


Retail sales contracted more than expected in April, dragged down by durable good sales, suggesting that the sluggish activity in the beginning of the year persisted into 2Q19. Retail sales (including vehicles) fell 0.8% over twelve months in the period (+0.9% in March), below the market consensus (-0.6%) and our forecast (-0.3%). Meanwhile, wholesale trade remained the main commercial activity, as sales of investment-linked materials are still elevated. At the margin, retail decelerated further, as retail sales (including vehicles) contracted 0.2% qoq/saar, a milder contraction than in 1Q19 (-5.8%), but far inferior to the 8.2% expansion in 4Q18. Overall, the bounce-back of mining production in the month (reported on May 31) is unlikely to offset the subdued retail activity and weak manufacturing, resulting in another weak Imacec print (monthly GDP proxy). We expect growth of 1.9% yoy in April (1.8% in March), leading to a 1.7% growth (below potential) in the beginning of the year.
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Business confidence continued to decline in May. ICARE’s business confidence index decreased to 50.6 points (from 55.9 one year earlier). Business confidence has been below last year’s levels during the whole year of 2019. Industrial confidence remains the main drag, as it fell 8.6 p.p. from May last year (44.1 vs. 52.7). Retail confidence also decreased 4.1 p.p. (to 55.2 from 59.3 one year ago), the seventh consecutive month of deterioration. Construction confidence returned to pessimistic levels, after two months in optimistic territory, retreating 0.1 p.p. to 46.6. Despite the escalating trade war, mining confidence remains upbeat, at 65.1 points, despite falling 1.4 p.p. in 12 months (from 66.5). Business confidence excluding mining recorded a second month below neutral levels, coming in at 47.2 points (53.4 one year ago), the lowest level in over a year.


The Senate approved yesterday the anti-fraud provisional measure (MP 871), with 55 votes in favor and 12 against. The measure revises the rules to issuing new pension benefits and establishes audit processes to detect existing fraud cases, especially in the rural sector. According to the government, the proposal will save BRL 10 billion in the first year (BRL 100 billion over the next 10 years). The measure now heads to presidential sanction.

The trade balance reached a BRL 6.4 billion surplus in May, broadly in line with our expectation and the market’s (BRL 6.2 billion and BRL 6.5 billion, respectively). The seasonally-adjusted annualized quarterly moving average slid to BRL 51 billion in May, from BRL 56 billion in the previous month, while the surplus over 12 months remained virtually stable at BRL 58 billion.
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Day Ahead: April’s industrial production will be released at 9:00 AM. We forecast a 0.2% monthly increase on seasonally adjusted terms, leading the year-over-year print to a 4.0% decline.


The central bank kept unchanged its monetary policy stance in June. The central bank stated that it has achieved, by a low margin, the monetary base target set for May. Besides, the monetary authority has committed to continue paying at least 62.5% in the auctions of its 7-day Leliqs in June. The current yield of Leliq is 70.7%, while the Badlar (time-deposit rate) stands at 53%. The monetary authority acknowledged that inflation has decelerated in April and May, although it remains at high levels. The central bank also stated that volatility in the exchange rate market has reduced significantly during the previous month. In this context, the monetary policy committee pledges to continue with the strict control of monetary aggregates, leading to a disinflation process in the coming months.

Day Ahead: The central bank will release its monthly expectations survey. In the latest survey, analysts raised their inflation forecasts for 2019 (to 40.0% from 36.0%) and for 2020 (25.2% from 23%).


May’s inflation accelerated to 0.15% mom (from 0.02% a year ago), but the core inflation measure was well behaved. CPI was pressured mainly by non-core items in the month. On an annual basis, headline inflation increased in the period, while core inflation fell slightly. Annual headline inflation climbed to 2.73% in May (from 2.59% in April). According to the breakdown, core inflation (excluding energy and food items) fell slightly to 2.56% (from 2.59%). In turn, food and beverage prices accelerated to 2.74% yoy in May (from 2.64%). At the margin, headline inflation also increased, while core inflation remained stable. The seasonally-adjusted, three-month annualized variation of the CPI was 3.89% in May (from 2.77% in April), while core inflation (excluding food and energy) stood practically unchanged in May (compared to April) at 2.94%. For 2019, we forecast annual headline inflation of 2.6%. Although headline inflation accelerated in May, core inflation seems to be well behaved, giving room to the central bank to keep the policy rate unchanged.
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Day Ahead: The institute of statistics (DANE) will publish exports for the month of April at 12:00 PM, which we expect to come in at USD 3.5 billion, a 8.8% yoy drop, as coal exports remain a key drag.

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