Itaú BBA - Evening Edition – President Bolsonaro’s approval rating increases

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Evening Edition – President Bolsonaro’s approval rating increases

Janeiro 22, 2020

His job approval rating went to 34.5% from 29.4% in August.

Talk of the Day


The statistical institute MDA published a poll on President Bolsonaro’s job approval rating. The survey showed that 34.5% consider his administration as “good” or “excellent” (from 29.4% in the previous poll, in August), while 31.0% consider his administration as “bad” or “horrible”, below the 39.5% seen in the previous poll. The poll surveyed 2002 respondents between January 15 and 18.

According to FGV’s monthly survey preview, business confidence in the industrial sector advanced 1.1 p.p. to 100.5 in January, above the neutral level at 100 points. The breakdown shows that the print was driven by improvements in the expectations component (+2.4 p.p. to 101.6), while the current conditions component decreased slightly (-0.3 p.p. to 99.3). The capacity utilization level in the industry (NUCI) rose 0.4 p.p. to 75.5%, but, despite the small increase, it suggests a still-wide slack in the economy. The final survey result will be published next week, on Wednesday (29).

Tomorrow’s Agenda: January’s IPCA-15 inflation will be released at 9:00 AM. We forecast a 0.64% monthly increase, leading the 12-month reading to 4.27% (above the 3.91% registered at the end of 2019). 


The coincident activity index (ISE) came in above expectations and still near potential in November, despite protest action disrupting some operations in the month. Activity grew 2.9% yoy (3.3% in October), above the market consensus and our call (both at 2.5%). For the rolling quarter, activity increased 3.0% (3.3% in 3Q19; 2.8% in 2Q19). On a seasonally and calendar adjusted basis, the series showed a 0.1% gain from October to November, but weakness early in the quarter led to a momentum slowdown to 0.6% qoq/saar (2.3% in 3Q19).

Looking ahead, a pick-up of business confidence in December bodes well for upbeat activity dynamics to persist. Confidence was boosted mostly by recovering expectations at the margin, likely linked to protest action losing momentum. Think-tank Fedesarrollo’s industrial confidence came in at 8.5% (0 = neutral), up from -1.1% at the close of 2018 and the 2019 year low of +1.3% in November. The improvement from last year was due to better expectations for the production in the upcoming quarter (25.6% vs. 13.5% in 2018; 4.0% in November), a less disappointing evaluation of current order volumes (-7.0 vs. -17.9 one year earlier) and lower inventory levels. On the other hand, retail confidence stayed elevated, near 2018 levels, at 29.7% (27.0% in November). Compared to the end of 2018, current retail sales improved, while expectations moderated slightly, in line with the evolvement of dynamic private consumption throughout 2019. Robust investment and consumption will drive growth of 3.1% this year (3.3% expected for 2019, 2.6% in 2018). An improved global outlook would likely offset possible domestic risks linked to social unrest. To date, protests have been mostly peaceful and not as disruptive and persistent as in other countries on the region.


December’s unemployment rate came in at 2.91%, below market consensus of 3.44%. In seasonally adjusted terms, unemployment rate declined to 3.13% in December (from 3.48% in November), while the participation and underemployment rate printed at 60.4% (from 60.2%) and 7.7% (from 8.2%), respectively. In turn, the labor informality rate, also using seasonally adjusted figures, stood at 56.1%. This stronger-than-expected result contrasts with the soft formal job figures (1.7% yoy in December, from 3.4% yoy in the end of 2018) and weaker economic activity, signaling that the positive surprise should fade away in the coming months.

Tomorrow’s Agenda: INEGI will publish the first inflation figure of the year, for the first half of January. We expect the bi-weekly CPI to grow 0.34% (from 0.11% a year ago), with core inflation at 0.17% (from 0.08% a year ago). Assuming our forecast is correct, headline and core CPI would grow 3.26% year-over-year (from 3.02% in the second half of December) and 3.69% (from 3.60%), respectively, also reflecting an unfavorable base effect due to lower monthly inflation at the beginning of 2019, associated to lower VAT in the northern frontier (that went from 16% to 8%). 


Tomorrow’s Agenda: The INDEC will publish the EMAE (official monthly GDP proxy) for November. We forecast a 0.8% year-over-year drop in November. Additionally, the trade balance for December will also be released. We forecast a surplus of USD 1.7 billion in the last month of 2019 (versus a USD 1.4 billion surplus registered in the same month of 2018) due to a weaker ARS. If our forecast is correct, the trade surplus reached USD 15.5 billion in 2019, from a deficit of USD 3.7 billion in 2018.    


Macro Scenario: GDP grew in 3Q19 after two consecutive quarters of declines due to a drought that affected the soybean harvest. We expect the economy to grow by 3.5% this year after posting zero growth in 2019, driven by the agricultural sector and the normalization of the harvest. Inflation closed 2019 at 2.8% yoy, the lowest level in ten years. In 2020, we expect consumer prices to increase by 3.5%, in line with our expectation of more dynamic domestic demand. In this context, we expect interest rates to increase to 4.25%. The government placed sovereign bonds amounting to 450 million dollars in the international financial markets in January. We estimate that total gross public debt will be about 27% of GDP at the end of 2020. ** Full story here.


Macro Scenario: The fiscal deficit increased in 2019, becoming the foremost challenge for the new government. In addition, inflation ended 2019 above the BCU’s target range for the second consecutive year, and GDP growth was weak. In 2020, we expect 1.5% GDP growth (up from 0.3% in 2019), supported by investments for the startup of a new refinery and further growth in Brazil. We project a slight slowdown in inflation and a slight fiscal consolidation. ** Full story here.

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