Itaú BBA - Weaker-than-expected retail sales in Brazil

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Weaker-than-expected retail sales in Brazil

Fevereiro 11, 2021

For 2020 as a whole, our GDP estimate remains at -4.1%

Talk of the Day

Brazil

COVID-19 update: The latest official information from the Ministry of Health is that Brazil registered a daily increase of 1,330 deaths (1,350 on the previous day) and 59,602 confirmed cases (from 51,486). The 7-day moving average of deaths increased to 1,041, from 1,030 on the previous day. The total number of deaths now stands at 234,850, with 9,659,167 confirmed cases, which implies a 2.4% mortality rate. The estimated reproduction rate (R) is currently at 0.94 (from 0.92). According to state health departments figures (from February 10), Brazil has vaccinated about 2.01% of its population (around 4.28 million individuals). On a related note, inputs for production of around 8.7 million doses of the CoronaVac vaccine arrived yesterday. **See our weekly report here.

Broad retail sales fell 3.7% mom/sa in December (Itaú: -2.7%; market: -1.0%), while core retail sales (excluding automobiles and construction material) receded 6.1% mom/sa (Itaú: -2.0%, market: -0.8%). The deeply negative reading in core retail sales was caused by the non-linearity of the seasonally adjusted series. The decline was widespread, with all retail segments retreating at the margin. Credit-sensitive as well as income-sensitive retail sales shrank in December. A slowdown in spending on goods is expected as the government reduces cash transfers to the population. However, our daily data signal increases in core and broad retail sales in January (for February and March, we expect declines). We forecast 4Q20 GDP growth at 3.0% qoq/sa. For 2020 as a whole, our GDP estimate remains at -4.1%. **Full story here.

Last night, the Lower House approved the Central Bank autonomy bill (PLP 19/2019), with 339 votes in favor and 114 against. All the amendments to the text were rejected. The project proposes four-year mandates for the Central Bank governor and its directors, who will continue to be appointed by the President. According to the approved rules, the board’s mandate will start at the beginning of the third year of the respective presidential term, and members may be appointed to a second term. The approved bill also establishes a 90-day deadline for the appointment of the board, which will start as soon as the law becomes effective, and a six-month quarantine following the end of the term. The bill will now head to presidential sanction.

​​Itaú Daily Activity Tracker: Due to technical issues, IDAT data regarding the past days is not available. See Tuesday’s report here.  

Day Ahead: Service sector revenue figures for December will be released at 9:00 AM (BRT). We anticipate a 2.4% mom/sa decline, finishing 2020 as whole with an 8.0% drop, lagging behind retail (+1.2%) and industry (-4.5%) sectors. In year-over-year terms, we expect a 5.6% decline (market consensus: -3.2%). The component of services offered to families (highly dependent on social interaction) is expected to post the strongest drop (-7.8% mom/sa), probably due to the negative development of the pandemic in December. Overall, the service sector is recovering at a slower pace than the goods sector but will likely gain traction this year as the pandemic decelerates more clearly and as the vaccination is carried out.

Chile

COVID-19 update: The latest official information from the Ministry of Health is that Chile registered a daily increase of 21 deaths (28 on the previous day) and 2,387 confirmed cases (from 2,839). The 7-day moving average of deaths increased to 76, from 75 on the previous day. The total number of deaths now stands at 19,105, with 760,576 confirmed cases, which implies a 2.5% mortality rate. The estimated reproduction rate (R) is currently at 0.79 (from 0.90). According to the latest figures (from February 10) provided by the Department of Statistics and Health Information, Chile has vaccinated about 5.39% of its population (around 1.03 million individuals).

The Chilean Central Bank has just released the minutes of its latest monetary policy meeting. We will publish an in-depth report on the minutes later today.

The central bank's monthly analyst survey shows increased inflation and growth expectations for 2021, but the retention of prolonged monetary stimulus. Following the January upside surprise and heavy rainfalls that could affect food prices in February, analysts revised the yearend inflation forecast up by 0.2 p.p. to 3.2%. The two-year outlook remained anchored to the 3% target. Meanwhile, growth for 2021 was revised up by 0.2 p.p. to 5.2%, likely due to greater carry-over from last year. Next year GDP growth was also lifted by 0.2 p.p. to 3.4%. Despite higher short-term inflation and a swifter activity recovery, the interest rate path was left unchanged with stability at the technical low of 0.5% for the next year, with a gradual normalization cycle thereafter (to 0.75% within 17 months and 2% in nearly three years). Overall, we also see rates remaining low for a significant period amid large output gaps and controlled inflationary pressures.

Mexico

COVID-19 update: According to the Johns Hopkins University, Mexico registered a daily increase of 1,701 deaths (531 on the previous day) and 10,738 confirmed cases (from 3,868). The 7-day moving average of deaths increased to 1,271, from 1,090 on the previous day. The total number of deaths now stands at 168,432, with 1,946,751 confirmed cases, which implies an 8.7% mortality rate. The estimated reproduction rate (R) is currently at 0.57 (from 0.61). According to the latest figures (from February 9) provided by the Secretary of Health, Mexico has vaccinated about 0.5% of its population (640,129 individuals).

Day Ahead: The Statistics Institute (INEGI) will publish December’s industrial production at 9:00 AM (BRT), which we expect to fall by 3.0% yoy (from -3.7% in November). Additionally, the Central Bank of Mexico (Banxico) will hold a board meeting to decide on the reference rate at 4:00 PM (BRT). We expect a 25-bp rate cut. In our view, benign financial conditions and a wide output gap will convince most board members of the central bank to resume its easing cycle, even though inflation (especially core) remains sticky.

Argentina

COVID-19 update: The latest official information from the Ministry of Health is that Argentina registered a daily increase of 118 deaths (158 on the previous day) and 7,739 confirmed cases (from 7,794). The 7-day moving average of deaths increased to 162, from 161 on the previous day. The total number of deaths now stands at 49,674, with 2,001,021 confirmed cases, which implies a 2.5% mortality rate. The estimated reproduction rate (R) is currently at 0.88 (from 0.69). According to the latest figures (from February 10) provided by the government, Argentina has vaccinated about 0.72% of its population (322,975 individuals).

Day Ahead: The INDEC (the official statistical agency) will publish the national CPI for January at 4:00 PM (BRT). According to Eco Go consulting’s price-tracker, consumer prices increased 3.8% mom in January. If this estimation is correct, annual inflation will increase to 38.1%, from 36.1% in December 2020.

Colombia

COVID-19 update: The latest official information from the Ministry of Health is that Colombia registered a daily increase of 217 deaths (297 on the previous day) and 5,442 confirmed cases (from 4,246). The 7-day moving average of deaths decreased to 276, from 288 on the previous day. The total number of deaths now stands at 56,507, with 2,166,904 confirmed cases, which implies a 2.6% mortality rate. The estimated reproduction rate (R) is currently at 0.55 (from 0.62).

Day Ahead: The trade balance for December will be published at 12:00 PM (BRT). Trade dynamics in November pointed to some global demand improvement, while milder import declines suggested a gradual domestic demand recovery. A trade deficit of USD 1.4 billion was recorded, narrowing mildly from the USD 1.6 billion deficit a year earlier. The rolling 12-month trade deficit sits at USD 9.8 billion (10.8 billion in 2019), still relatively sticky. For December, we see a USD 926 million deficit (USD 553 million one year before), as the import recovery advances while exports remained weak.

Peru

COVID-19 update: The latest official information from the Ministry of Health is that Peru registered a daily increase of 159 deaths (159 on the previous day) and 5,557 confirmed cases (from 4,523). The 7-day moving average of deaths decreased to 182, from 184 on the previous day. The total number of deaths now stands at 42,626, with 1,196,778 confirmed cases, which implies a 3.6% mortality rate. The estimated reproduction rate (R) is currently at 0.87 (from 0.98).

Day Ahead: The Central Bank of Peru (BCRP) will publish its February monetary policy meeting decision at 8:00 PM (BRT). We expect the BCRP to keep its policy rate at 0.25%. The wide negative output gap supports the BCRP keeping the policy rate at 0.25% for the rest of the year. However, we note there is risk of an earlier-than-anticipated withdrawal of monetary-policy stimulus given higher inflation (reached 2.68% in January).

Uruguay

Day Ahead: The central bank will hold its first monetary policy meeting of the year. The central bank is likely to maintain a loose monetary policy stance through 1Q21 to avoid liquidity constraints associated with the uncertainties surrounding the strength of the economic recovery. Consequently, we do not expect changes in the monetary policy rate, currently at 4.5%.

Paraguay

Day Ahead: The central bank will publish its monthly GDP proxy (IMAEP) for December 2020 during the day. The IMAEP fell 1.4% mom/sa in November (-0.6% yoy). We forecast a 2.8% year-over-year contraction in December.



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