Argentine trade deficit continued to widen in January


The deficit hit a record for the first month of the year. The trade balance showed a deficit of USD 986 million in January 2018, compared with a deficit of USD 51 million in the same month of 2017. The deficit was higher than our forecast (USD 700 million) and the market consensus (Bloomberg: USD 557 million). As a consequence, the 12-month trade balance hit a record deficit of USD 9.4 billion, from USD 8.5 billion in 2017. At the margin the deficit is running even wider, at USD 11.7 billion (accumulated in 3 months and annualized), although this represents a narrowing from the USD 13.3 billion posted in 4Q17. Imports increased by 32.1% YoY, led by purchases of intermediate goods and parts (25.6%), capital goods (29.5%) and imports of oil (85.7%). Purchases of consumer goods rose 28.8%, while imports of cars expanded 48.5%. On a sequential basis, imports grew 2.0% MoM and are now growing at 33.5% QoQ/saar (32.5% QoQ/saar in the previous month). External salesincreased by 10.7% YoY in January. Sales of industrial products rose by 29.6% due to higher exports of cars and biodiesel. Exports of primary products expanded by 12.4% led by sales of corn, while oil exports rose 63.2% YoY. Exports of manufactured agricultural products fell 8.8% YoY due to lower shipments of soybean meal and soybean oil. Total exports rose 13.9% MoM in January and they are currently growing at 25% QoQ/saar (7.4% QoQ/saar in December).

We expect the economic expansion to lead to a wider trade deficit in 2018. We forecast a deficit of USD 10 billion for this year, with a current-account deficit of 5.5% of GDP. ** Full Story here.


In January, both sub-indexes of business confidence were below levels recorded one year earlier, but some positive signs persist. According to think-tank Fedesarrollo, industrial confidence came in at an indifferent 0%, the first time out of pessimistic ground since January last year (+1.9%). Although the seasonally adjusted series still places industrial confidence in pessimistic territory (near 2.5%), it gained 1.3 percentage points from December, building on the proceeding gains of 1.3pp at the close of 2017 and 2.4pp in November, and the minimum of -7.5% recorded in May. Compared to January last year, there was an improvement in both expectations for the upcoming quarter and inventory levels, while current activity – measured by the volume of goods orders – remains a confidence drag. Meanwhile, retail confidence remains in optimistic territory and near the historical January average. Retail confidence was 21.8%, compared to 24.8% one year ago and 21.4% in December. Of the sub-indexes, favorable news came from lower inventories. Looking ahead, higher real wages (as inflation falls) and lower interest rates, along with a favorable external environment, will likely aid a confidence improvement and an activity recovery. Nevertheless, uncertainty around the political cycle could limit a recovery of investment. We see an activity recovery to 2.5% growth this year (1.8% last year).


Day Ahead: The statistics institute (INEGI) will publish CPI inflation figures for the first half of February at 11:00 AM (SP Time). We expect bi-weekly inflation to post 0.20% (market consensus: 0.29%). Assuming our forecast is correct, CPI inflation would decrease to 5.44% year-over-year (consensus: 5.50%). Shortly after, at 12:00 PM (SP Time), the Central Bank will publish the minutes of February’s monetary policy meeting (held two weeks before). We expect the minutes to further explain what we see as the main message in the statement; that is, the board is mindful of the risks (NAFTA, elections, U.S. monetary & fiscal policies) but might find room to stay on-hold in April (in spite of the Fed’s likely rate hike). The minutes will show to what extent this view is shared by the five board members.

Fuente: ITAU

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