Itaú BBA - Ibope poll shows high percentage of blank/null and undecided voters

Brazil Review

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Ibope poll shows high percentage of blank/null and undecided voters

julio 2, 2018

Voting intentions for the main pre-candidates declined

The Brazilian economy in June 2018

The Ibope poll published on June 28 showed a high percentage of blank, null and undecided voters (41%) for the October presidential election. The Central Bank kept the benchmark Selic interest rate at 6.50% and its 2019 inflation forecast is close to the target in the scenario assuming a stable interest rate. The National Monetary Council (CMN) announced an inflation target of 3.75% in 2021, down from 4.0% in 2020, 4.25% in 2019, and 4.5% in 2018. Economic activity expanded in April, but May figures likely had a negative impact from the truckers’ stoppage. Inflation readings in May and June also showed upward pressure due to the strikes.

Ibope survey shows high percentage of blank/null and undecided voters

The Ibope survey published on June 28 showed higher uncertainty surrounding the October presidential election. Voting intentions for the main pre-candidates declined relative to other institutes’ polls, while the percentage of blank/null and undecided votes rose to 41% (33% in the last Datafolha poll, published in early June). In the scenario without Lula (PT), Jair Bolsonaro (PSL) had 17% of voting intentions (19% in the last Datafolha survey), Marina Silva (REDE) 13% (15% in Datafolha), Ciro Gomes (PDT) 8% (10% in Datafolha), Geraldo Alckmin (PSDB) 6% (7% in Datafolha) and Álvaro Dias (PODE) 3% (4% in Datafolha). In the alternative scenario, former President Lula da Silva leads with 33%.

Copom kept the Selic rate unchanged at 6.50%

The minutes of the Central Bank’s Monetary Policy Committee (Copom) meeting reinforced the message that forward guidance has been abandoned, for the time being, given the current highly uncertain environment. The text also informs that the Copom will closely monitor price dynamics and inflation expectations, searching for signs that recent shocks might be spreading through the economy, in which case presumably a policy response might be in order. The Central Bank’s Inflation Report shows inflation forecasts around 4.2% for 2018 and 4.1% for 2019 and 2020 in the scenario with constant interest rate at 6.50% p.a. and constant exchange rate at 3.70 reais per dollar, against targets of 4.5%, 4.25% and 4.0%, respectively. In the market scenario, which considers interest rate and exchange rate forecasts in line with the Focus survey, which currently assumes a 6.50% Selic rate until the end of 2018, rising to 8.0% in 2019, inflation forecasts are 4.2% for 2018, and 3.7% for 2019 and 2020. The National Monetary Council (CMN) announced an inflation target of 3.75% in 2021, down from 4.0% in 2020, 4.25% in 2019, and 4.5% in 2018.

Economic activity increased in April, but probably receded in May

Activity figures were positive in April. Industrial production advanced 0.8% mom/sa. Core retail sales rose 1.0%, while broad retail sales (including vehicles and construction material) climbed 1.3%. Real revenues from services increased 1.0%. However, May readings were likely affected by the strike. Our forecast for industrial production is a decrease of 15.1% mom/sa.

Seasonally-adjusted unemployment rate was stable at 12.4% in May

According to the national household survey (PNAD Contínua - IBGE), Brazil’s nation-wide unemployment rate receded to 12.7% in the quarter ended in May from 12.9% in the quarter ended in April. Using our seasonal adjustment, unemployment was stable at 12.4%, as the decline in the participation rate offset falling employment. The real wage bill shrank 0.4% qoq/sa. The labor market continues to advance slowly, contributing to lower forecasts for GDP growth in 2018.

Inflation was also impacted by the strike

The mid-month consumer price index IPCA-15 climbed 1.11% in June, above market expectations. The index went up 0.14% in May and 0.16% in June 2017. Year-to-date inflation reached 2.35%, while the year-over-year change accelerated to 3.68% from 2.70% in May. According to census bureau IBGE, the 1.11% increase was the highest for June since 1995. Food and beverages (0.38 p.p.), transportation (0.36 p.p.), and housing (0.27 p.p.) provided the largest upward contributions during the month. In our view, a significant share of the temporary pressure on food and fuel prices was caused by the effects of the stoppage of cargo transportation on the distribution of these items.

Financial assets 

In June, the Ibovespa dropped 8.1% in dollars and 5.2% in local currency. Country risk measured by the CDS increased and ended the month at 270 bps. The exchange rate weakened to 3.86 reais per dollar.

What’s next

Election news, including polls on voting intentions and possible alliances between parties and candidates, will continue to be the main highlights.



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