Itaú BBA - Retail sales fall sharply in Brazil

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Retail sales fall sharply in Brazil

February 14, 2019

We forecast a slight seasonally-adjusted increase in both retail sales indicators in January

Talk of the Day
 

Brazil

Core retail sales dropped 2.2% in December, well below the median of expectations and our forecast (-0.1% and -0.3%, respectively). The breakdown shows that the normalization after strong Black Friday results in November was greater than expected. Broad retail sales (which include vehicles and construction materials) declined 1.7% in December. In addition to the Black Friday effect, sales of vehicles and construction materials also fell in the month. For the time being, we forecast a slight seasonally-adjusted increase in both retail sales indicators in January.

Local news indicate that President Bolsonaro will meet with the economic team today, at 3:00 PM, in order to decide which will be the official pension reform proposal to be sent to congress. 

The new president of the senate's economic affairs committee said that the confirmation hearing of Roberto Campos Neto, indicated for central bank governor, will be scheduled for February 26. 

Day ahead: December’s Services Sector Survey (PMS) will be released at 9:00, for which we expect a 1.2% yoy decline.

Argentina

Day ahead: The INDEC (the official statistical agency) will publish the January’s national CPI at 5:00 PM (SP Time). The consulting firm Elypsis, which tracks prices, has projected a new sequential reduction in headline inflation for January to 2.5% mom, which would lead the annual inflation rate to 48.7%.

Chile

Day ahead: The central bank will publish the minutes of its January meeting at which the board unanimously hiked the policy rate by 25bps (to 3%). We expect the minutes to outline that the domestic activity and core inflation evolvement has been in line with expectations, yet provide some inkling that the riskier external outlook could result in a more cautious approach to the normalization process.

Colombia

Day ahead: The central bank will publish December’s trade balance at 1:00 PM (SP Time). We expect a trade deficit of USD 800 million in the period (USD 517 million surplus one year earlier). At the same time, activity indicators for the month of December will be published. We expect industrial production to rise 4.0% yoy, while still strong auto sales in the month point at robust retail sales growth of 8.0% in twelve months.

Paraguay

Macro scenario: Consumer prices remained stable in January and annual inflation slowed to 2.4%, nearing the lower bound of the central bank’s target range (4% ± 2%). We expect the central bank to leave the monetary policy rate unchanged in 2019, although now the risks are tilted toward an interest rate cut. Economic activity recovered in 4Q18 due to increased electricity generation. We estimate that GDP grew by 4% in 2018. Our YE19 GDP growth forecast also stands at 4%, although we see downside risks due to the drought. The government issued USD 500 million in bonds in the international financial markets recently. We expect total public gross debt to be at 21.4% of GDP by the end of 2019.

Uruguay

Macro scenario: The fiscal deficit closed 2018 at 2.7% of GDP, down from 3.5% in 2017, helped by the transfer of assets resulting from the “over 50” law (1.3% of GDP). For 2019, we forecast a fiscal deficit at 2.9% of GDP due to slower expected growth. Economic growth is likely to decelerate due to a sluggish tourist season and lagging exports and investment. We forecast GDP growth of 1% in 2019, following a 1.9% estimated expansion in 2018. Annual inflation decreased in January due to lower price increases for public services compared with the same month last year. Our YE19 inflation forecast stands at 7.5% (above the upper bound of the target range).



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