Latam Talking Points


The consumer price index IPCA climbed 0.22% in April, below our estimate (0.30%) and the median of market expectations (0.28%). The index had risen 0.09% in the previous month and 0.14% in April 2017. The year-to-date increase of 0.92% is the lowest since the Real Plan was implemented. The year-over-year change accelerated to 2.76% from 2.68% in March. Market-set prices moved 0.09% in April and the year-over-year increase receded to 1.0% (1.3% yoy in March). Regulated prices climbed 0.60% during the month and the year-over-year change advanced to 8.4% (7.1% yoy in the previous month). Breaking down by product groups, the largest upward contributions during the month came from healthcare and personal care (0.11 p.p.), led by medication prices and health insurance premiums, followed by apparel (0.04 p.p.), housing (0.03 p.p.), and food and beverages (0.02 p.p.). On the opposite end, the biggest downward contributions came from food consumed away from home (-0.02 p.p.); poultry and eggs (-0.02 p.p.); auto fuels (-0.01 p.p.); rent and fees (-0.01 p.p.); and meats (-0.01 p.p.).

Our preliminary estimate for the IPCA in May is a 0.35% advance that would push the year-over-year rate up to 2.80%. The biggest upward contribution will come from the housing group – due to the activation of the yellow mode in the tariff flag system for electricity and to tariff adjustments by some utility companies –, followed by food and healthcare. On the other hand, transportation is expected to post a negative rate, thanks to a shaper decline in ethanol fuel prices. ** Full Story here.

Copom Cockpit: End of the cycle. The Brazilian Central Bank’s Monetary Policy Committee (Copom) meets again next week. Recent data continue to show an environment of low inflation and anchored expectations, amid a more gradual recovery in activity and weaker-than-expected economic activity figures in 1Q18. Copom’s inflation forecasts will likely increase for 2018 and remain stable for 2019 compared to those published in March in the minutes of the last committee meeting and in the most recent Inflation Report. We believe that the Copom will follow the path presented in the March meeting and announce a final 25-bp cut in the Selic in May. ** Full Story here.

Day Ahead: March’s retail sales will be released at 9:00 AM (SP Time). We forecast core retail sales to remain stable (consensus: 0.7%) and broad sales to increase 0.8% (consensus: 0.2%). In year over year terms, we forecast core sales to grow 5.7% (6.7) and broad sales at 7.1% (5.5%). The Central Bank announced the rollover of 8,900 FX swap contracts expiring in June 1st.


The central bank’s May analyst survey shows that the start of the normalization is still expected to only start in 2019 (in line with Itaú). Analysts continue to see the policy rate reaching 3.5% in 2 years’ time. Meanwhile, yearend inflation was revised up 0.1pp to 2.6% following the upside surprise in April, while the 2-year expectation remains anchored at the central bank’s 3% target. Activity growth forecasted for this year stayed at 3.6% (also in line with Itaú’s baseline scenario), despite upside surprise in March data.

The National Automotive Association of Chile (ANAC) revealed that car sales rose 43.7% year over year in April, up from the 12.5% in March and 18.1% in 2017. The total new cars sold was also the highest April sale on record. At the margin, car sales growth picked up to 44.9% qoq/saar in the quarter ending in April (-5.7% in 4Q17 and +49.9% in 3Q17). Robust car sales was the principal driver behind elevated durable consumption in 2017, and signs are that it will persist into 2018. Low inflation, interest rates and the need for replacement after several years of postponing that decision are aiding sales.

Scenario Review: Recovery consolidates. The activity recovery advanced in the first quarter of the year, driven by mining as well as an improvement in other sectors and upbeat confidence levels. We continue to expect growth of 3.6% this year, from 1.5% last year. Recovering investment and stronger exports are likely to lead to 3.5% growth in 2019. Our base case is a stable policy rate of 2.5% for this year, given the very low inflationary pressures despite solid growth. We expect four 25-bp hikes next year, as the output gap closes, taking the policy rate to 3.5%. **Full Story here.


Day Ahead: Activity indicators for the month of March will be published at 12:00 PM (SP Time). For March, we and the consensus expect industrial production to decline 2.5% year over year. Meanwhile, retail sales likely gained 3.8% in twelve months (consensus: 2.80%). Also at 12:00 PM (SP Time), the central bank will publish the trade balance for the month of March. We expect the trade balance correction to persist with a deficit of USD 365 million in March (consensus: – USD 414 million).


Day Ahead: Statistics institute (INEGI) will publish March’s industrial production at 10:00 AM (SP Time). We estimate that industrial production fell 2.8% year-over-year (consensus: -3.90%). On the same day, the National Association of Department Stores and Supermarkets (ANTAD) will announce April’s same-store-sales. We and the consensus expect the growth of ANTAD sales to slow down to 3.5% year-over-year.

Fuente: Itaú

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