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Service sector revenues recede slightly in Brazil

January 15, 2020

In our view, economic activity remains on a gradual acceleration trend, but with some weaker signs at the margin

Talk of the Day

Brazil

The service sector revenues (PMS) increased 1.8% yoy in November, in between market expectations (2.0%) and our estimate (1.2%). At the margin, the indicator decreased 0.1% mom/sa, following two consecutive monthly gains. The breakdown shows 3 out of 5 categories declined in the month. Services offered to families, which is an important item for our GDP tracking, posted the largest drop in the month (-1.5% mom/sa). In our view, economic activity remains on a gradual acceleration trend, but with some weaker signs at the margin. Our GDP tracking indicates growth of 0.5% qoq/sa in 4Q19.

According to local news, the government decided to raise the minimum wage to BRL 1045. Originally, salaries were increased to BRL 1039 (from BRL 998 in 2019), but after the stronger than expected inflation figures observed in December, president Bolsonaro decided to provide this extra increase in the minimum wages. The economic team estimates that for each BRL 1 increase in the minimum wage, the federal cost grows BRL 355 million, thus, the total cost of this proposal will be of around BRL 2.13 billion. The measure will be in force from February 1st onwards.

Day Ahead: At 9:00 AM, November’s retail sales will be released. We expect a 0.6% mom/sa increase in core retail sales and a stable seasonally adjusted monthly print in the broad indicator, leading the year-over-year growth rate to 2.8% and 4.6%, respectively.

Argentina

Day Ahead: At 4:00 PM, the INDEC will publish the national CPI for December. Elypsis Consulting estimated a 4.2% monthly increase for consumer prices, leading 2019’s annual inflation to close at 54.6%, marking the highest reading since 1991.

Peru

Day Ahead: At 9:00 AM, the statistics institute (INEI) will announce November’s GDP proxy, which we expect to increase 2.4% yoy, from 2.1% in October.



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