2023/03/17
Manufacturing fell sequentially for the fifth consecutive month, while core retail sales increased for the first time since August. Retail sales increased 1.2% yoy in January (-1.7% in December), above the Bloomberg market consensus of a 1.5% contraction and our -0.7% call. Core retail sales (excluding fuels and vehicles) expanded 2.8% YoY (-1.8% in December), increasing 2.6% (SA) from December to January. Meanwhile, manufacturing contracted by 1.1% MoM/SA, building on the 1.9% contraction in December. In annual terms, manufacturing grew a mild 0.2% (from 0.5% previously), between the 0% Bloomberg estimate and our 1.5% forecast. The data is consistent with a 3.7% YoY increase for the coincident indicator in January (1.3% in the previous month), to be released on Friday.
Manufacturing now sits around 13.1% above pre-pandemic levels, down from a +17.9% peak in August last year as the economy slows. During the quarter ending in January, manufacturing increased 1.8% YoY, moderating from the 3.4% expansion in 4Q22. At the margin, manufacturing contracted 1.1% from December (-1.9% previously), resulting in a -9.0% contraction qoq/saar, deeper than the 5.0% contraction in 4Q22 (+3.6% in 3Q22).
While retail sales gained sequentially in January, activity levels remain below recent highs. Core retail sales sit 14.5% above pre-pandemic levels. In the quarter ending in January, retail sales expanded 0.2%, from 0.5% in 4Q22, while core retail sales grew 0.2% (0.7% contraction in 4Q22; +6.3% in 3Q22). At the margin, core retail sales retreated 9.0% qoq/saar, (down 7.1% in 4Q22).
We expect the economy to slow to 0.6% in 2023, from 7.5% last year. High interest rates, weaker global growth and elevated policy uncertainty all point to an activity slowdown this year.
Vittorio Peretti
Carolina Monzón