Itaú BBA - Better-than-expected trade balance in Mexico

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Better-than-expected trade balance in Mexico

Janeiro 28, 2020

A moderate slowdown in the U.S. economic activity in 2020 will probably have some impact on manufacturing exports

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The trade balance posted a USD 3.1 billion surplus in December, above market expectations of USD 2.5 billion. With this result, the trade balance ended 2019 with a USD 5.8 billion surplus (from a USD 13.6 billion deficit in 2018). Using seasonally adjusted figures, the quarter-over-quarter annualized growth rate (qoq/saar) of total exports declined 12.8% in 4Q19, dragged by a deterioration on manufacturing and oil exports. Total imports declined 12.1% qoq/saar in 4Q19, driven by a strong fall of non-oil imports. Looking ahead, a moderate slowdown in the U.S. economic activity in 2020 will probably have some impact on manufacturing exports, while a modest recovery on internal demand will likely support an improvement on non-oil imports. ** Full story here.


According to FGV’s monthly survey, construction confidence advanced 2.1 p.p., to 94.2 in January. The breakdown shows that both the current conditions (+1.7 p.p, to 84.3) and the expectations component (+2.4 p.p, to 104.2) improved in the month. In spite of this result, the capacity utilization in the sector declined 1.0 p.p. (to 70.9%). The report published by FGV states that this result is consistent with the recovery in the construction sector (especially in real estate), which, in their view, is expected to improve further throughout the year. So far, confidence surveys on the construction, retail and industrial (preview) sectors registered positive results in January, while consumer confidence declined in the month, pressured by the stronger than expected inflation of December.

Tomorrow's Agenda: December’s primary budget balance for the central government will be released, for which we expect a BRL 8.4 billion deficit. Also, the Central Bank publishes its credit report for December at 9:30 AM (SP time). Finally, FGV will release January’s industrial confidence (final survey) at 8:00 AM (SP time).


Tomorrow's Agenda: The central bank holds the first monetary policy meeting of 2020. In December, the board opted to keep the policy rate stable at 1.75% in a unanimous decision. Meanwhile, the easing bias was dropped as the board signaled stable rates during the coming months “in a context of exchange rate intervention and fiscal stimulus”. Since the meeting, the Chilean peso appreciated and volatility moderated, resulting in the central bank pausing additional intervention operations. Meanwhile, protests lost momentum, but there remains significant uncertainty regarding how persistent the effect on confidence will be (affecting the pace of the activity recovery). We expect the central bank to hold the policy rate at 1.75% as the board bides it is time to review how uncertainty, volatility and inflation evolve.


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