IP weakened further on a monthly basis, albeit less than last month
Headline inflation was pressured by core tradables and gasoline prices
Differences within board members over the easing pace may be emerging
A strained domestic demand and the stabilization of the CLP would lead to contained inflationary pressures going forward.
With lockdown measures persisting into July and job shedding continuing, import demand will likely stay suppressed in the near-term
The transmission of COVID-19 remains under control, allowing the country to progress toward the new normal.
The continued decline in activity led the government to increase the fiscal package.
A downbeat activity outlook, swiftly loosening labor market and diminishing inflation expectations point to subdued inflationary pressures ahead
Weak internal demand in April reflects the first full month of lockdown
Larger fiscal and monetary support are necessary to contain the activity collapse
Expansionary monetary policy for long
We now project a GDP contraction of 10.9%, from -9.1% before.
A stronger-than-expected activity decline called for a boost to stimulus measures, but uncertainty complicated the specificities
Mining activity still lifted growth in the month.
Lower gasoline and agro prices exerted downward pressure on inflation
We forecast a current account surplus of 0.6% of GDP this year.
The unemployment rate will likely exceed 10% on average this year, peaking in coming months.
The sectorial activity for May points to the GDP proxy (IMACEC) contracting 15.5% (14.1% fall in April).
We see the policy rate reaching 2%, but risks are tilted towards lower rates.
The unemployment rate is to average 16% this year (10.5% last year), but risks tilt to the upside if the economic recovery in 2H20 underwhelms.
We now project a GDP contraction of 10.9% for this year, from -9.1% before
Exports and imports remained weak in May amid the Outbreak
Broad-based deterioration in economic activity amid the outbreak
Imports continued to slide.
Private consumption determinants also weakened
Another 50-bp cut in the next meeting is likely
Upside surprise came from core non-food items
There is the risk of a wider primary deficit than the 4.8% that we currently expect for this year
We expect activity to show a bigger contraction in 2Q20 due to the impact of social distancing measures.
PM-Itaú posts the sharpest decline in the series
Private demand deteriorated, showing the first negative effects from the outbreak
Weak imports is consistent with a significant consumption and investment contraction ahead
Rates seen staying at 0.5% until mid-2022
Preventing widespread bankruptcies and job losses justifies the recent boosting of fiscal and monetary support.
While the latest developments allow for short-term fiscal relief, a tough fiscal consolidation program would be needed ahead.
Non-natural resource sectors were affected the most
The enhanced fiscal response would help avoid a more long-lasting impact from the coronavirus pandemic on the economy
With lockdown measures persisting through May, and only partially eased in June, the activity slump will be sharp in 2Q20
Headline inflation was unchanged in May, helped by price freezes and caps
Industrial production deterioration reflects a full month of lockdown amid the outbreak
We project a GDP drop of 3.6% for this year.
We forecast a 2.6% drop in GDP for this year.
The downside surprise in inflation was driven by a contraction in core goods ex-food prices
As inflation drops swiftly and the activity slump consolidates, the central bank will likely deem it is necessary to persist with monetary easing
As job losses rapidly rise, import dynamics are set to remain weak ahead
Argentina defaulted again.
A swiftly loosening labor market and low oil prices lowered inflationary pressures
More stimulus likely required to aid recovery, but rating risk hovers
Falling internal demand and a weaker currency will likely lead to a gradual CAD narrowing this year
With the health situation deteriorating in May, mobility restrictions were extended, hence activity momentum is set to worsen before it gets better
We see room for lower rates, but the board would prefer not to move more aggressively than already done.
Reduced global demand, mobility restrictions and lingering domestic uncertainties point to a 3.7% GDP contraction this year
Labor market loosening would persist after April as social distancing measures continued and growth prospects faltered.
Additional labor market loosening ahead is in line with a significant consumption decline this year.
La caída de la demanda global, las restricciones de movilidad y la persistente incertidumbre domestica nos hacen esperar una contracción del PIB para 3,7%.
Most members pointed out the importance of acting with prudence
We expect Banxico to continue a cautious easing cycle
We forecast a surplus of USD 17.5 billion this year, as measures to contain the spread of COVID-19 will take further a toll on activity and imports
Industrial and services sector started showing the negative effects from the outbreak
Net portfolio flows deteriorated amid uncertainty surrounding the outbreak.
Weak exports and imports reflected the full COVID-19 effect in the economy.
Already weak retail sales started reflecting the negative effects from COVID-19
Headline inflation rebounded driven by core food and gasoline prices
Fiscal accounts to deteriorate further due to a large fiscal stimulus and weak economic outlook
A larger external drag and recovery doubts consolidate the view that significant monetary stimulus is required to combat the shock
Going forward, the expectation of a rising trade surplus, given a domestic demand implosion, would support a swift CAD narrowing
Reduced global demand, mobility restrictions and lingering domestic uncertainties would lead to a 3.7% contraction this year
The central bank will continue enhancing liquidity measures to ease the functioning of the financial system and to protect business operations and employment.
The deterioration in economic activity was generalized.
Balance of risk for inflation remains uncertain
Despite weak internal demand and a weaker currency, we expect a gradual narrowing of the current account deficit given the developments in the oil market.
How economic activity unfolds will depend on the duration of the lockdown, its effect on the labor market and corporate balance sheets
Still, we note that monetary financing of a growing fiscal deficit tilts risk to the upside.
We estimate a 2.6% drop in GDP this year.
We estimate a 2.6% drop in GDP this year.
Manufacturing output is the most affected sector by the outbreak
The economy is on the receiving end of two shocks, one from the coronavirus and the other from oil market developments.
Strict measures to contain the outbreak
We now forecast a GDP contraction of 8.3% for 2020, from -6.4% in our previous scenario.
Low oil prices and a widening output gap mean inflation would remain contained going forward.
Uncertainties over domestic policy direction will also keep denting investment outlook.
Las medidas de control del coronavirus, el sentimiento privado bajo y el deterioro del mercado laboral, llevarán a un débil dinamismo de las importaciones.
As social distancing measures stay in place, private sentiment drops and the labor market loosens, import dynamics will remain weak going forward.
Fall in gasoline prices exerted downward pressure on inflation
Given the economic outlook, we expect rates to remain at their technical minimum throughout the year
Core inflation is slowing fast at the margin
Board members seem to agree on the need for lower rates
Economic data is only starting to reflect the impact of the shock, with activity set to get worse before it gets better.
Weaker job gains and steady labor force growth led the loosening of the labor market
Economic growth deteriorated in 1Q20 from an already weak growth pace in 2019
Labor market loosening hints at considerable consumption fall in 2Q20.
The monthly GDP proxy is set to contract 1% YoY in March.
Given the drastic outlook deterioration, we see room for at least one more 50-bp rate cut to 2.75%
Coincident indicators point to a sharp contraction in March.
Manufacturing exports deteriorated in March amid disruption in global supply chains
Weak momentum in monthly GDP before COVID-19
Inflation was dragged mainly by a fall in gasoline prices
Retail sales growth pace was weak before COVID-19
We expect a wider trade surplus this year.
We expect a dramatic deterioration of the fiscal accounts in 2Q20.
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The evolvement of external imbalances will depend on the opposing forces of low oil prices and slumped domestic demand
While rates would remain at their technical minimum throughout the year, we cannot rule out the use of additional forms of monetary tools.
Despite strong activity at the start of the year, dual shocks would have a significant impact on the economy and lead to a growth contraction.
The rise in headline inflation was driven by food and education services.
Economic activity to deteriorate sharply amid coronavirus outbreak
Coronavirus outbreak is set to deteriorate activity sharply
We see inflation falling closer to the 3% target in 2Q20.
Lower inflation driven by a fall in gasoline prices
With the Chilean economy all but closing down in late March and April, import dynamics will deteriorate further in coming months
Inflation remains near the upper bound of the central bank’s tolerance range (2%-4%), but core measures are closer to the 3% target.
Despite the cautious tone, we expect Banxico to reduce monetary policy further in the upcoming months.
The fiscal update reflects worse fiscal revenues and some support to the economy through extra spending
Despite the activity improvement at the beginning of 2019, we expect a 1.6% contraction this year.
Widening output gap to dominate inflation trajectory
Headline inflation was dragged by a sharp fall in core inflation
We expect the GDP proxy for February to grow 3.3%.
Any additional monetary stimulus would likely come through quantitative easing measures
As economic conditions deteriorate, significant labor market loosening is expected ahead.
The shock expected to hit activity this year would lead to some labor market loosening
We expect a 50bp rate cut to 0.5% at tomorrow’s monetary policy meeting.
We forecast a GDP contraction of 4.4% for 2020.
Our call is for stable rates ahead, but risks are tilted to more easing.
Manufacturing exports deteriorated on a monthly basis
Economic activity to deteriorate sharply in 1H2020
Lower commodity prices are likely to affect trade surplus this year
At the margin, we estimate that the s.a. current account surplus reached 2.3% of GDP in 4Q19.
Coronavirus outbreak to hit private consumption in 1H2020
Our GDP growth forecast for 2020 was recently revised down to -4.4% from -2.0%
Lower energy prices pressured down inflation
We expect a policy rate of 5.50% by the end of 2020.
Public gross fixed investment deteriorated further.
Amid the recent terms-of-trade collapse and the global scenario deterioration, Colombia’s external imbalances will likely endure ahead.
We expect a weaker domestic demand and lower energy prices to lead to a narrowing of external imbalance this year.
The global expansion of COVID-19 and the resulting measures undertaken only enhance headwinds ahead.
The global liquidity wave paved the way for rate cuts in Chile.
Coronavirus outbreak pose downside risks to industrial production outlook
Strong external headwinds will likely lead to a growth slowdown ahead
Tariff freeze decelerated headline inflation.
Price stability would give the BCP room to maintain the current monetary policy rate.
The government is focused on public accounts.
Annual inflation rebound will fade away in March as the unfavorable base effect disappears
The quick correction of Chile’s external imbalances is a favorable development that could alleviate part of the pressure on the CLP.
Inflation pass-through pressures will keep inflation elevated for the coming months until weakened internal demand
Inflation pass-through pressures will keep inflation elevated for the coming months until weakened internal demand
Robust growth, along with the weakening of the Colombian peso, pose a risk to our disinflation expectation
The figures show internal demand in Mexico was weak in 2019
The favorable FDI inflows to Colombia would continue to allay possible central bank concerns
Annual headline inflation stood below the central bank target for the sixth month in a row
Despite the positive dynamics at the beginning of the year, a continued momentum recovery is unlikely
A pesar de la dinámica positive al comienzo del año, parece poco probable que se sostenga el impulso
A further labor market loosening is expected amid low growth.
Labor market developments in urban zones is in line with a prolonged period of activity recovery and elevated business confidence levels
Manufacturing exports improved on a monthly basis, but momentum is still weak
Sectorial indicators point at a January GDP proxy (IMACEC) expansion of 1.0%.
Total revenues decreased by 8.2% yoy in real terms in January, dragged down by a weak tax collection
Most members are data dependent for future monetary policy decisions
The balance of risks for inflation was kept as uncertain
Final domestic demand was dragged mainly by weak gross fixed public investment
Weak imports sustained a wide trade surplus in January.
Economic activity marked two years of recession.
We expect the CAD was close to 4.5% of GDP last year (3.9% in 2018).
Growth in 4Q19 was broadly in line with 3Q19 as slowing consumption and investment were offset by a smaller net export drag.
Subtle signal that further loosening could once again become part of the discussion
Deputy Governor Esquivel is no longer backing a 50-bp move.
Despite protests losing momentum by December, activity at the margin continued to weaken, hampering the carry-over for 2020
Below the inflation target
The incoming government proposes a fiscal rule to ensure the sustainability of public finances.
Reflecting restrained domestic demand pressures is the near historical low non-tradable inflation
Still double-digit falls in consumer and capital goods imports underscore the weak domestic demand
Moderating service inflation points to well-behaved core price dynamics
Moderating service inflation points to well-behaved core price dynamics
Despite a more gradual disinflation path now expected, inflation is viewed to be under control
Expansionary monetary policy and fiscal stimulus would aid an activity recovery from 4Q19
We expect the full impact of the recent events on the labor market to be reflected in coming months
Inflation balance of risks remains symmetrical.
If the labor market shows some improvement ahead, the central bank would not need to increase the monetary stimulus.
Despite positive signs that activity is improving, downbeat private sentiment would lead to below potential growth this year
The economy likely contracted 0.1% in 2019
Our expectation of rates cuts depends on the impact of the Chilean peso on inflationary pressures
Weak non-oil imports supported the improvement in the trade balance
The real wage bill continues to expand at a solid pace
Economic activity momentum remained weak
We expect the trade surplus to remain wide in 2020
Activity contracted by 2.3% yoy during the first 11 months of the year
We forecast a primary deficit of 1% of GDP this year
Inflation was pressured by an unfavorable base effect and an update in excise tax
GDP growth resumed in 3Q19, led by consumption
The fiscal deficit increased in 2019, becoming the foremost challenge for the new government
We expect the current account deficit to remain wide at around 4.5% of GDP for both 2019 and 2020.
A gradual core retail sales slowdown expected ahead, in line with depressed sentiment and a weakening labor market
Economic activity was dragged mainly by a sharp contraction in construction output
Our forecast for 2020 stands at 43%
Uncertainties over the direction of domestic policy are weighing on investment
Industrial production surprised on the downside
Persistence in core inflation stand in the way of a more frontloaded easing cycle
Despite the lower-than-expected inflation, our diffusion index points to above-target prints in coming months
An export normalization amid constrained imports would lead to a sharp narrowing of the current account deficit this year
Food price normalization after the recent supply shocks would aid the expected disinflation process this year
As activity operations normalized during the final month of 2019, we expect a milder year-over-year activity contraction in December