Itaú BBA - Evening Edition – Retail sales advance in Brazil, but pandemic’s impact is still not reflected

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Evening Edition – Retail sales advance in Brazil, but pandemic’s impact is still not reflected

Abril 7, 2020

These figures are related to February, before the strong negative impacts from the Coronavirus on economic activity

Our LatAm Macro Monthly report was published today, featuring scenarios for Brazil, Mexico, Argentina, Chile, Colombia, Peru and the global economy. ** Full story here.

Talk of the Day 


Core retail sales advanced 1.2% mom/sa in February, rebounding from the 1.4% mom/sa drop in January. In year-over-year terms, the core index increased 4.7%. The breakdown shows relative widespread growth, with 5 out 8 segments posting positive numbers. The strongest increases were in "furniture and appliances” and “textiles, apparel, footwear” sectors (both growing 1.6% mom/sa. On the opposite direction, the steepest decline was in the “books, periodicals, magazines” division (-3.8% mom/sa). Broad retail sales, which include vehicles and construction material, grew 0.7% mom/sa in February (+3.3% yoy). The “auto and parts” segment advanced 0.9% mom/sa while the “construction material” stayed virtually stable (+0.1% mom/sa). It’s worth mentioning that these figures are related to February, before the strong negative impacts from the Coronavirus on economic activity. ** Full story here.

Coronavirus update: the latest official information from the Ministry of Health is that Brazil has 13,717 confirmed cases (up by 1661, from 12,056 yesterday), with 667 confirmed deaths (up by 114, from 553 yesterday).

Tomorrow’s Agenda: The service sector real revenue (PMS) figures will be released at 9:00 AM (SP time), for which we expect a 2.4% yoy increase.


Monthly inflation in March was below market expectations. Consumer prices fell by 0.05% month-over-month in March (from 0.39% a year ago and 5-year median of 0.38%), below our forecast of -0.01% and below market expectations of 0.06% (as per Bloomberg). Headline inflation was dragged mainly by a fall in energy prices (-4.17%), while core inflation printed at 0.29% (from 0.34% a year ago and 5-year median). Looking ahead, we expect inflation for 2020 at 3.2%. Lower energy prices and widening of output gap will put downward pressure on inflation, offsetting the depreciation of the currency. ** Full story here.

Tomorrow’s Agenda: The Statistics Institute (INEGI) will publish February's industrial production. We estimate industrial production fell by 2.30% year-over-year (from -1.6% in January).


A USD 1.2 billion trade surplus was registered in March, broadly in line with our call, but well above the USD 0.6 billion registered last year as domestic demand and lower global oil prices aid a swift correction of external imbalances. The trade data in the month showed both exports and imports dropped significantly, but the impact from lower fuel prices, weakened consumer goods imports (on the back of a CLP depreciation) and hampered investment outlook (affecting capital imports) outweighed the weaker mining and manufacturing sales. As a result, a USD 3.3 billion trade surplus was recorded in 1Q20, up USD 1.5 billion from 1Q19 and lifting the rolling 12-month trade balance to a USD 5.6 billion surplus (USD 4.2 billion last year). At the margin, the trade surplus is at an even larger USD 10.3 billion annualized in the quarter (according to our SA adjustment; USD 5.4 billion in 4Q19). With the Chilean economy all but closing down in late March and April, import dynamics will likely deteriorate further in coming months. ** Full story here.

Tomorrow’s Agenda: The institute of statistics (INE) will release inflation figures for March. Inflation increased further in February as tradable inflation accelerated. Annual inflation picked up to 3.9% (3.5% in January), the highest since mid-2016, while core inflation was a still-low 2.7% (up a milder 0.2pp). For March, we expect consumer prices to gain 0.4% from February (0.5% last year), lifted by the food division and the seasonal education rise while lower transportation prices would limit the gain. As a result, annual inflation would remain near the upper bound of the central bank’s tolerance range around the target, at 3.8%.


Manufacturing and construction recovered on a sequential basis in February, before Covid-19 outbreak. Manufacturing grew 1.2% mom/sa in February (8.7% qoq/saar). On a year-over-year basis, the index fell 0.8% in February but increased 0.1% yoy in the quarter ended in the month. Most of the sectors showed drops in relation to the same month of 2019. Furniture and the automotive industry led the declines, while food industry and refinery posted gains. Construction rose by 0.3% mom/sa in February but fell 28.7% qoq/saar. The index plummeted 22.1% yoy in the second month of the year and 14.3% in the quarter ended in February. Employment in the sector contracted 16.1% yoy in January (figures have a one-month lag). According to the qualitative survey (conducted before the Covid-19 outbreak), 59% of the companies involved in public works expect activity to decrease in the period March – May, compared to 46% in the case of companies involved in private works.

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