Itaú BBA - Evening Edition – Higher-than-expected midmonth inflation in Brazil

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Evening Edition – Higher-than-expected midmonth inflation in Brazil

Janeiro 23, 2020

In year-over-year terms, inflation advanced to 4.34% (our call: 4.27%; mkt: 4.30%), from 3.91% in the previous month.

Talk of the Day


January’s IPCA-15 inflation came in at 0.71% mom, above our call (0.64%) and broadly in line with market consensus (0.70%). In year-over-year terms, inflation advanced to 4.34% (our call: 4.27%; mkt: 4.30%), from 3.91% in the previous month. Looking at the breakdown, once again the food and beverage component was the main driver for the monthly headline (contribution of +0.45 p.p.), influenced by the 4.83% mom increase in beef prices (but decelerating from the 17.71% mom gain in the previous month). The transportation component posted the second largest contribution (+0.17 p.p.), driven by gasoline prices adjustments (2.64% mom increase, following a 1.49% gain in December). Compared to our call, beef prices came in lower than expected (-0.08 p.p. contribution). On the other hand, services increased more than expected, mainly driven by lower deflation in the housing component (-0.14% mom; Itaú: -0.46%), particularly in the rental and condo fee dynamics. ** Full story here.

Tax collection came in at BRL 147.5 billion in December, worse than our call (BRL 155.6 bn) and market’s expectations (BRL 153.3 bn). Tax collection stayed roughly stable in real terms in the month. Weakness came from revenues related to corporate profits (IRPJ/CSLL), which decreased 4.4% yoy in real terms, paying back gains in the last two months, while those related to consumption and wage bill increased 0.9% yoy and 2.2% yoy, respectively.

Tomorrow’s Agenda: The CAGED formal job creation for December will be released at 10:00 AM. We forecast a net destruction of 332k formal jobs in the period, given the typical seasonality for the month. In seasonally-adjusted terms, we expect a creation of 55k jobs, with the 3-month average falling to 75k from 80k. Additionally, FGV’s consumer confidence survey for January will be released at 8:00 AM.


Bi-weekly inflation in 1H of January was pressured mainly by cigarettes (associated to an update in excise tax) and non-core agro prices. Mexico’s CPI posted a bi-weekly rate of 0.27% in the first half of January (from 0.11% a year ago), below our forecast of 0.34% and above market expectations of 0.25% (as per Bloomberg). In turn, core inflation stood at  0.20% (from 0.08% a year ago). The inflation figure was pressured mainly by prices of cigarettes (bi-weekly rate of 7.64%) and some non-core agro products (tomato: 7.27% and green tomato: 20.90%). ** Full story here.

Tomorrow’s Agenda: At 9:00 AM, the statistics institute INEGI publishes November’s monthly GDP proxy (IGAE), which we forecast to contract 0.6% yoy (after falling 0.8% in October).


The government met its primary fiscal deficit target for 2019. The treasury reported an estimated deficit of 0.44% of GDP (ARS 95.1 billion), slightly better than the target agreed with the IMF (-0.5%, including the allowed deviations for social and investment expenditures), and beating our forecast of -0.8%. The nominal deficit for 2019 came in at 3.8% of GDP (vs. our estimate of -4.1%). The treasury noted that the deficits include some extraordinary income registered as current revenues and equivalent to 0.52% of GDP. ** Full story here.

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