The sharp decline was caused by the trucker’ stoppage, which affected supply and production chains in the final two weeks of the month


Industrial production fell 10.9% mom/sa in May but was better than the median of market expectations (-13.2%) and our estimate (-15.1%). Compared to May 2017, the indicator was down by 6.7%. The sharp decline was caused by the trucker’ stoppage, which affected supply and production chains in the final two weeks of the month. Our preliminary estimate for industrial production in June is an advance of 10.9% mom/sa, as the shock gives way to normalization. ** Full Story here.

Day Ahead: Auto production (Anfavea), a coincident indicator for June’s industrial production will be released today.


The latest central bank survey of expectations, and the first under Caputo’s leadership of the central bank, showed a new increase in inflation expectations. GDP growth forecasts were adjusted downward. Participants expect inflation to hit 30% yoy by December 2018, up from 27.1% in the May Survey, reflecting a weakening peso. Analysts expect a slower disinflation than that described in the previous poll. The CPI is expected to increase 2.5% in July and 2% on average in the following three months, compared with 2% and 1.7%, respectively, in the May survey. The expected core inflation for 2018 (yearend) was adjusted to 28.2% from 25.1% before.

The survey also showed a new increase in inflation expectations for 2019 and 2020. Pundits forecast inflation at 20.2% next year (up from 19% before) and at 15% in the following year (one point above the previous estimate). Both forecasts are above the inflation targets included in the IMF program (17% and 13%, respectively). Survey participants now expect the monetary policy rate to start to decline in August, to 38% from the current level of 40%. According to the survey, the reference rate (seven-day repo rate) will fall to 33% by December this year (instead of 30% in the previous survey) and to 24.88% by the end of 2019 (up from 23.25% before). ** Full Story here.

Automotive output fell by 13.4% year over year in June, to 39,420 units.  External sales increased by 16.2% YoY in June, to 22,894 units, while total sales in the domestic market plummeted 31% year over year to 55,358 units, affected by the sharp depreciation of the peso against the dollar. According to ADEFA (local chamber) the national strike in Argentina and the trucker strike in Brazil affected the output. During 1Q18, output rose 10% yoy, exports increased 23% yoy and domestic sales expanded 1.7% yoy. We expect a deterioration in car output in the coming months due to lower domestic sales and lower exports to Brazil.


Day Ahead: The central bank will publish) the GDP proxy (Imacec for the month of May today. In the month, industrial production remained strong (3.6%), while commercial activity likely stayed robust. We forecast Imacec (monthly GDP proxy) to gain 0.3% from April and result in annual growth of 4.0% (5.9% in April), consolidating the strong activity start to the year. Later, INE will publish nominal wage growth for May. In April, wage disinflation advanced. The historically merged wage index shows wage growth of 3.4% year over year in April (4.2% in 2017). Wage growth in the quarter ending in April sits at 3.2% (4.1% in 4Q17). Low wage prints reflect the slack in the labor market.


Day Ahead: The National Institute of Statistics will release inflation for June today. Consumer price inflation inched up to 3.16% in May (from 3.13% in April), but still near the 3% target. Tradable inflation increased mildly to 1.58% (from 1.51% in April), while non-tradable inflation (4.57%) stood broadly unchanged from last month, both measures excluding food and regulated prices. The average of the core measure ticked up to 3.43% from 3.39% in April. We expect consumer prices to gain 0.21% from May (0.11% one year ago), taking annual inflation to 3.25%, lifted by entertainment prices and transportation (gasoline and airplane tickets). Apparel and food inflation will likely be a drag in the month.


Day Ahead: The Statistics Institute (INEGI) will announce April’s gross fixed investment today, which we expect to expand 7.5% year-over-year (from a 4.1% contraction in March). Coincident indicators – such as construction output and imports of capital goods – grew at a strong year-over-year pace in April. However, these results are somewhat inflated by a big positive calendar effect (i.e.: more business days because of the non-overlapping Easter holidays). In fact, we expect some sequential deceleration of gross fixed investment in April. Later, Banxico will publish the monetary policy minutes of the last board meeting (June) held two weeks ago. At this meeting, the board decided to hike the reference rate by 25-bps (to 7.75%) amid a more adverse scenario (namely, expect ations o f tighter monetary policy in the US and more uncertainties associated to NAFTA and the presidential elections). The statement of June’s meeting featured a number of hawkish changes. In the same vein, we expect the content of the minutes to point in the hawkish direction.

Fuente: Itaú

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