Talk of the Day
Brazil
In a unanimous decision, the Copom delivered a 50-bp hike, as widely expected, taking the Selic rate to 11.25% pa. The statement did not pin down any specific pace for coming decisions, but made clear the relevance of structural fiscal measures, yet to be presented. These, according to the authorities, can reduce risk premia, thereby helping to contain exchange rate depreciations. For now, we maintain our view of a 50-bp pace ahead, also waiting for more clarity on the fiscal front. We’ll learn more about the authorities’ rationale with the release of the meeting minutes on November 12. Still, lingering fiscal challenges pose upside risks to inflation and the future path of interest rates. **Full story here.
The trade balance recorded a surplus of US$4.3 bn in October. The result came in weaker than our call and the market's expectation (US$4.5 bn and US$4.6 bn). In October 2023, the trade balance had posted a US$9.2 bn surplus. Exports totaled US$29.4 bn, slightly weaker than registered the same month of 2023, led by the weaker performance of industrial commodities. In their turn, imports totaled US$25.1 bn, stronger than the previous year's print for October, led by stronger inflows of industrial goods. As a result, the trade balance accumulates a surplus of US$82.6 bn in 12 months. The 3-month moving average of seasonally adjusted and annualized data (3MMA SAAR) is running at US$65. Our view: The trade balance was slightly below our expectations in October, with imports a bit above the projected level. We continue to observe exports above the historical average, but below what was seen last year. On the other hand, imports also remain at a high level, supported by strong activity and a heated labor market. For the coming months, we expect the balance to stabilize around the level observed in October. **Full story here.
The Central Bank released the trade flow of October. The flow was positive at US$ 3.1bn in the month, with inflows of US$ 6.7bn on the commercial side and outflows of US$ 3.6bn on the financial side. Despite the higher outflows on the financial side, the October result was slightly above the historical average for the month, with higher inflows on the commercial side. In the year to date, the total flow totaled US$ 9.7 billion, below the US$ 24.2 billion recorded in the same period last year. Our view: after two months of a negative balance, the foreign exchange flow was positive in October. Financial outflows continued at a high level, but the trade balance accelerated again, interrupting the negative trend of recent months. Going forward, we expect the net flow to be close to the historical average, but still below that seen last year. **Full story here.
Colombia
BanRep’s technical staff revised GDP up and short-term CPI down, while outlined an interest rate path that, on average, is above analysts’ expectations (9.0% yearend). Activity this year is now seen growing 1.9% (0.1pp above July’s scenario, 0.6% in 2023), and 2.9% for 2025 (2.7% in the previous report). The staff’s 2024 yearend inflation forecast was revised down by 0.4pp to 5.3% (Itaú: 5.6%; 9.3% last year), while YE25 CPI was lifted 5bps to 3.10% (Itaú: 3.6%). Regarding monetary policy, the central bank staff’s baseline scenario implies a policy rate path that, on average over the following eight quarters, is somewhat above the analyst’s expectations of 9.0% by yearend, and 6.0% by YE25 (implying that an acceleration from the 50bp cutting pace is not incorporated in the short-term). The estimated neutral rate was retained at 2.4% for this year (5.4% nominal) but revised up 10bps to 2.6%. Our Take: Domestic fiscal noise stemming from the regional distribution reform, along with increased global financial volatility mean the bar to accelerate the pace of the rate cutting cycle in the near-term is high. The minutes of October’s meeting will be released later today (50bp cut to 9.75%). The final policy meeting of the year will take place on December 20. **Full story here.
Commodities drag exports in September. Exports reached USD 4.1billion in September, falling in between the Bloomberg market consensus of USD 4.2 billion and our USD 4.0 billion call, leading to an annual contraction of 0.9% (-2.5% YoY in August). In the month, oil exports dropped 23.4% YoY (-10.1% YoY in August), due to lower prices. Similarly, coal exports completed two months in negative territory, contracting 17.5% YoY (-27.1% in August), due to both lower prices and volumes. As a result, exports excluding traditional goods (oil, coal, coffee, and ferronickel), accounted for the 51% of total exports, and rose 20.3% YoY (5.2% YoY in August). During 3Q24, total exports increased 2.5% YoY. At the margin, exports increased 4.3% qoq/saar (+6.4% in 2Q24; -16.4% in 1Q24). Our take: We expect the trade deficit to continue to widen during the remainder of the year amid imporving domestic demand. Overall, we see a CAD of 2.5% of GDP this year (stable from 2023).
Chile
Tomorrow’s Agenda: the Central Bank will publish the survey of financial operators. The last survey showed an expected electricity-led inflation rebound in October to 0.6%. The one-year inflation outlook stayed at 3.5%, while the key two-year view remained anchored to the 3% target. The policy rate cutting cycle was seen concluding at 4.13% (4% previously). Also on Thursday, the Central Bank will publish the trade surplus for October. We expect a surplus of USD 1.6 billion (USD in October last year), lifted by double-digit mining exports.
Argentina
Tomorrow’s Agenda: Manufacturing and construction data for September 2024 will see the light on Thursday. According to coincident indicators, both indexes showed mixed signals on sequential basis in September. The industrial index (IPI), published by OJF consulting, rose by 1.9% mom/sa (-0.3% yoy), while construction activity, according to Grupo Construya, decreased by 5.4% mom/sa (22% yoy).
Mexico
Tomorrow’s Agenda: Mexico’s statistics agency (INEGI) is scheduled to publish the CPI for the full month of October . We expect a monthly advance of 0.50% MoM, which would take inflation to 4.71% YoY (prior 0.05% and 4.58% respectively). We estimate an acceleration on non-core food prices, following a 1.65% deflation in September. INEGI is expected to publish gross fixed investment data for the month of August, key in providing a view on the demand-side of the economy at the 3Q24 after the flash GDP at +1.0% QoQ. Separately, private consumption data for the month of August will also be published, following a 5.2% YoY rise in July. Finally, focus also on the Judicial Reform constitutional developments.
Peru
Tomorrow’s Agenda: The BCRP will hold its monthly monetary policy meeting. In September, the BCRP surprised by maintaining the policy rate at 5.25%, with market consensus and our call for a 25 bp cut to 5.0%. In the context of heightened global uncertainty, we expect the BCRP to hold the policy rate again at 5.25%, yet maintain the data dependent guidance, keeping the door open for a cut in December.
