Itaú BBA - CHILE – Temporary retail boost in May

Macro Latam

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CHILE – Temporary retail boost in May

julio 3, 2019

We expect another below potential Imacec print (monthly GDP proxy) of 2.3% in May (2.1% in April).

Retail sales in May came in above expectations, but the pickup may be transitory as promotional events (cyber day/week) and a favorable base of comparison likely boosted activity. Retail sales including vehicles grew 3.3% over twelve months (-0.7% in April), above both the Bloomberg market consensus and our call of a 1.0% rise. Meanwhile, wholesale trade continued to drive commercial activity, as sales of investment-linked materials (machinery, equipment and construction materials) remain elevated. Overall, the bounce back of retail activity and manufacturing in the month is likely to be partly offset by surprisingly weak mining activity, resulting in another below potential Imacec print (monthly GDP proxy) of 2.3% in May (2.1% in April).

In May, automobile and part sales grew a mild 0.6% (-5.7% previously), remaining a drag on retail activity. Meanwhile, domestic electronics and apparel contributed 2.0pp to the 3.3% retail sales gain. Overall, the 5.5% growth of the commercial activity index – which aggregates retail activity, wholesales and vehicle sales – was boosted by the 8.4% rise of wholesales (6.6% year-to-date). In the quarter ended in May, the commercial index grew 3.5% (3.3% in 1Q19), driven once more by the wholesale of investment-related machinery and equipment sales (15.6% yoy in May and 15.4% in the quarter), while retail sales (including vehicles) grew an improved 1.2% (0.4% in 1Q19). Despite the upbeat wholesales of investment related goods, other indicators such as falling business confidence and declining imports of capital goods suggest that investment dynamism is fading.

At the margin, retail activity improved. Retail sales (including vehicles) increased 1.9% from April, resulting in growth of 4.0% qoq/saar but it follows a strong 4.9% decline in 1Q19.

With consumer sentiment entrenched in pessimistic territory amid uninspiring labor market developments, retail activity is unlikely to sustain an elevated rebound. We see growth of 2.4% this year, down from 4% for 2018.

Miguel Ricaurte
Vittorio Peretti

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