Itaú BBA - Evening Edition – Confidence indicators in Brazil confirm sharp drop in April

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Evening Edition – Confidence indicators in Brazil confirm sharp drop in April

Abril 27, 2020

In all, these figures come in line with those observed in the special survey conducted by FGV two weeks ago

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Brazil

According to FGV’s monthly survey, consumer and retail confidences declined sharply in April, amid the COVID-19 pandemic. Consumer confidence receded 22.0 p.p., to 58.2, strongly influenced by the expectations component, which contracted 28.9 p.p. to 55.0, while the current conditions component dropped 10.5 p.p. to 65.6. Retail confidence also declined sharply, by 26.9 p.p., to 61.2, driven by a strong deterioration in the current conditions component (-33.0 p.p., to 60.9), while the expectations component fell by 19.5 p.p. to 63.2. In all, these figures come in line with those observed in the special survey conducted by FGV two weeks ago, where the consumer and retail confidences declined 22.1 and 26.8 respectively. It’s worth mentioning that industrial confidence (preview), released Friday, also posted a strong decline in the month (-39.5).

The BCB released its weekly survey with market participants (Focus). The median of 2020 GDP growth expectations fell for the 11th consecutive week, receding by 38 bps (to -3.34%) and accumulating a 564-bp drop during such period. The median of GDP expectations for 2021 oscillated to 3.0% (from 3.1%), while it has not changed for 2022 (at 2.5%). The median of IPCA inflation expectations for 2020 declined to 2.20% (from 2.23%), accumulating a 100-bp decline over seven consecutive weeks. Inflation expectations for 2021 and 2022 remained stable at 3.40% and 3.50%, respectively. The median of year-end Selic rate expectations did not change for 2020 (at 3.00%), while it has declined 25 bps for 2021 (to 4.25%) and 12 bps for 2022 (at 5.88%). Finally, the exchange rate expectations remained stable at BRL 4.80/USD for 2020, and oscillated to BRL 4.55/USD for 2021 (from 4.50) and BRL 4.46/USD for 2022 (from 4.40).

Coronavirus update: the latest official information from the Ministry of Health is that Brazil has 66,501 confirmed cases (up by 4,613 vs 3,379 yesterday), with 4,543 confirmed deaths (up by 338, vs 189 yesterday).

Tomorrow’s Agenda: April’s IPCA-15 inflation will be released at 9:00 AM (SP time). We forecast a 0.12% monthly increase, leading the 12-month reading to 3.06% (from 3.67% in March). Also, the Central Bank will publish March’s credit report at 9:30 AM (SP time). Finally, FGV will release April’s services and construction confidences at 8:00 AM (SP time).

Mexico

Tomorrow’s Agenda: INEGI will announce March’s trade balance at 8:00 AM (SP time), which we expect to post a surplus of USD 0.9 billion.

Argentina

Tomorrow’s Agenda: The INDEC will publish the EMAE (official monthly GDP proxy) for February at 4:00 PM (SP time). Leading and coincident indicators showed positive signals on a sequential basis for that month, before the negative effects of COVID-19. The manufacturing index rose 1.2% mom/sa, while construction output rose 0.3% mom/sa. We forecast a 0.1% mom/sa increase, leading to a 1.5% year-over-year drop in February.



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