Weekly Report
February 24 to 28
A equipe do Departamento Econômico do BES Investimento do Brasil S/A - Banco de Investimento elaborou esta mensagem com propósito meramente informativo, baseada em informações disponíveis
Both here and abroad, the calendar of events should be dominated by the release of activity indicators and
news on monetary policy directives. On the international front there will be updates on 4Q13 GDP figures for
some European countries, the US and Canada, in addition to speeches by FOMC, BoJ, BoE and ECB members.
In Brazil, GDP data will be closely monitored by market participants, as will the Copom meeting on Wednesday,
when we expect the Brazilian monetary authority to slow the rhythm of its ongoing tightening cycle. Fiscal figures
for Jan14 should also attract some attention, especially after the announcement of the budget expenditure freeze
last week.
Brazil
Echoing what Mr. Tombini – the Brazilian Central Bank governor – told journalists in a conference call last Tuesday, our calculations suggest that Brazilian GDP should have registered a positive change in the last quarter of 2013, thus likely having spared the government from reading headlines with the undesirable ‘R’ word in the coming days. However, the 0.4% QoQ sa expansion that we forecast is far from pointing towards favourable prospects for upcoming quarters, since the carry-over estimate for full-year growth in 2014 would reach 0.5%! That is, notwithstanding the huge – and successful – volume of fiscal incentives granted to boost private consumption recently, we think supply constraints should become more evident than ever in the near future and reveal the country’s low growth potential.
Jankiel Santos Chief economist + 55 11 3074 7344 jsantos@espiritosantoib.com.br Flávio Serrano Senior economist + 55 11 3074 7343 fserrano@espiritosantoib.com.br Ombudsman 0800 7700 668 In spite of the disastrous performance of the industrial sector in 4Q13 – we estimate a 1.1% QoQ sa drop after a nearly unchanged result in 3Q13 – the services group should have expanded 0.7% QoQ sa in the last quarter – a better result than the 0.1% QoQ sa in 3Q13 – on the back of a robust contribution from retail sales – which leapt 1.5% QoQ sa from +0.6% QoQ sa in the previous quarter. Still from the supply standpoint, we expect the agriculture and livestock segment to have recovered part of the strong decline observed in the prior reading (-3.5% QoQ sa) and to have increased by 1.6% QoQ sa in 4Q13.
Chart 1: Brazilian GDP – demand breakdown (QoQ sa growth rate)
-0.4 0.8 -4.0 -3.0 -2.0 -1.0 0.0 1.0 2.0 3.0 4.0 D e c-0 2 M a r-0 3 Ju n -0 3 S e p -0 3 D e c-0 3 M a r-0 4 Ju n -0 4 S e p -0 4 D e c-0 4 M a r-0 5 Ju n -0 5 S e p -0 5 D e c-0 5 M a r-0 6 Ju n -0 6 S e p -0 6 D e c-0 6 M a r-0 7 Ju n -0 7 S e p -0 7 D e c-0 7 M a r-0 8 Ju n -0 8 S e p -0 8 D e c-0 8 M a r-0 9 Ju n -0 9 S e p -0 9 D e c-0 9 M a r-1 0 Ju n -1 0 S e p -1 0 D e c-1 0 M a r-1 1 Ju n -1 1 S e p -1 1 D e c-1 1 M a r-1 2 Ju n -1 2 S e p -1 2 D e c-1 2 M a r-1 3 Ju n -1 3 S e p -1 3 D e c-1 3
Domestic absorption Net exports
Source: IBGE, BESI Brasil.
From a demand standpoint, the pillar for the GDP expansion is likely to have been net exports, which we estimate to have contributed with 0.8% out of the total 0.4% QoQ sa growth – with exports having grown 3.2% QoQ sa, while imports are likely to have declined 0.2% QoQ sa. Consequently, for the first time since 3Q11, domestic absorption – the aggregation of private consumption, government consumption and gross capital formation – should have posted a negative contribution to the GDP, shaving off 0.4% of the total change. Unfortunately, this decline is likely to be related to a dreary performance of gross capital formation – we estimate it to have fallen 3.2% QoQ sa – as we expect government consumption to have climbed 1.1% QoQ sa, while private
consumption should have recorded a 0.1% QoQ sa increase. That is, while the official line states that the mix of Brazilian economic growth will improve as investments are going to gain participation at the expense of consumption, the actual outcome of the GDP is likely to unveil that gross capital formation receded for the second quarter in a row. Such a backdrop does not bode well for genuine improvement in GDP growth in the coming years.
Notwithstanding the nuances of the slow growth, the government has already signalled that is not happy with recent GDP readings and intends to avoid imposing further obstacles to a recovery on any possible front, including the monetary one. That seems to be the reason for the constant references that Central Bank board members have been making to the lagged impact that prior interest rate hikes should have on the economy and, consequently, inflation dynamics. Such warnings were made once again by the Central Bank governor, Mr Tombini, during a conference call with journalists last week and, in our view, they should have sufficed to reinforcing the likelihood of a milder increase in the Selic rate next Wednesday. However, in an attempt to avoid any potential criticism with regard to such a move while price indices are still far from pointing towards a tranquil inflation backdrop, we had the announcement of a (apparent) fiscal adjustment plan last week. That is, now the Brazilian monetary authority will be able to claim that, in tandem with the lagged effect of higher interest rates, the fiscal policy should also help to fight inflationary pressure. Thus the need for continuing with the 50bps pace should have lessened and, consequently, we think it may be the moment for cutting the pace by half. That’s the base of our call that the next Copom decision on Wednesday is likely to mark the end of the tightening cycle.
Weekly indicators
Date (Brazil) Time Indicator Reference forecast BES consensus Market Prior 21-23/Feb - - G20 Fin. Ministers & CB Governors Meet in Sydney - - - - - - - -
24-28/Feb - - Brazilian Tax Collections Jan R$ 123.0B R$ 123.6B R$ 118.4B
- - Briitish Nationwide House Px NSA YoY Feb - - 9.0% 8.8%
- - Colombian Industrial Confidence Jan - - - - -1.3
- - Colombian Retail Confidence Jan - - - - 22.0
Monday 06:00 German IFO Business Climate Feb - - 110.6 110.6
07:00 Euro-Zone CPI YoY Jan F - - 0.7% 0.7%
07:00 Euro-Zone CPI Core YoY Jan F - - 0.8% 0.8%
08:00 Brazilian FGV Consumer Confidence Feb - - - - 108.90
08:00 Brazilian FGV CPI IPC-S 23-Feb 0.68% - - 0.78%
08:30 Brazilian CB Focus Report - IPCA 2014 21-Feb - - - - 5.93%
10:30 US Chicago Fed Nat Activity Index Jan - - - - 0.16
11:00 Mexican Unemployment Rate NSA Jan - - 4.9% 4.3%
11:00 Mexican Bi-Weekly CPI 15-Feb - - 0.2% 0.1%
11:00 Mexican Bi-Weekly Core CPI 15-Feb - - 0.2% 0.2%
12:30 Israeli CB sets the base interest rate 24-Feb - - 1.00% 1.00%
12:30 US Dallas Fed Manf. Activity Feb - - - - 3.8
15:00 Brazilian Trade Balance - 3rd week Feb - - - - -$338M
23:00 Nzealand 2Yr Inflation Expectation 1Q - - - - 2.3%
- - Peruvian GDP YoY 4Q - - 5.2% 4.4%
Tuesday 04:00 German GDP SA QoQ 4Q F - - 0.4% 0.4%
04:00 SAfrican Leading Indicator Dec - - - - 100.3
04:45 French Business Confidence Feb - - 95.0 94.0
05:00 Brazilian FIPE CPI - 3rd preview Feb 0.61% - - 0.73%
06:00 Italian Retail Sales MoM Dec - - - - 0.0%
06:30 SAfrican GDP Annualized QoQ 4Q - - 3.5% 0.7%
07:00 Italian Consumer Confidence Index Feb - - - - 98.0
Weekly indicators
Date (Brazil) Time Indicator Reference forecast BES consensus Market Prior
11:00 US House Price Index MoM Dec - - 0.4% 0.1%
11:00 US S&P/Case-Shiller US HPI YoY 4Q - - - - 11.2%
11:00 Mexican Retail Sales YoY Dec - - 0.5% 1.9%
12:00 US Consumer Confidence Index Feb - - 80.0 80.7
12:00 Mexican Current Account Balance 4Q - - -$5001M -$5457M
12:00 US Richmond Fed Manufact. Index Feb - - - - 12.0
12:10 US Fed's Tarullo speaks in Arlington - - - - - - - -
- - Portugal Releases Year-to-Date Budget Report - - - - - - - -
Wednesday 06:30 Briitish GDP QoQ 4Q P - - 0.7% 0.7%
12:00 US New Home Sales Jan - - 405K 414K
14:00 US Fed's Rosengren speaks in Boston - - - - - - - -
18:45 Nzealand Trade Balance Jan - - 230M 523M
20:00 SKorean Current Account Balance Jan - - - - $6429.1M
- - Brazilian Serasa Business Credit Delinquencies - - - - - - - -
- - Brazilian CB sets the Selic target rate 26-Feb 10.75% 10.75% 10.50%
Thursday 04:00 BoJ's Sato speaks in Tokyo - - - - - - - -
04:45 French Consumer Confidence Feb - - 8700.0% 8600.0%
05:00 Spanish GDP QoQ 4Q F - - 0.3% 0.3%
05:55 German Unemployment Rate Feb - - 6.8% - -
07:00 Euro-Zone Economic Confidence Feb - - 100.9 100.9
07:00 Euro-Zone Business Climate Indicator Feb - - 20.0% 19.0%
08:00 Brazilian FGV Inflation IGPM MoM Feb 0.33% - - 0.48%
09:00 Brazilian GDP QoQ 4Q 0.4% 0.3% -0.5%
09:00 Brazilian GDP YoY 4Q 1.6% 1.5% 2.2%
09:00 Brazilian GDP 4Qtrs Accumulated 4Q 2.2% 2.2% 2.3%
10:00 German CPI YoY Feb P - - 1.3% 1.3%
10:30 Canadian Current Account Balance 4Q - - -$16.8B -$15.5B
10:30 US Durable Goods Orders Jan - - -1.0% -4.2%
10:30 US Durables Ex Transportation Jan - - -0.2% -1.3%
10:30 Brazilian Personal Loan Default Rate Jan - - - - 6.7%
10:30 US Initial Jobless Claims 22-Feb - - 333K 336K
12:30 US Fed's Fisher speaks in Frankfurt - - - - - - - -
13:00 US Kansas City Fed Manf. Activity Feb - - - - 5.0
15:30 ECB's Draghi Speaks in Frankfurt - - - - - - - -
17:15 US Fed's Lockhart & George speak in Atlanta - - - - - - - -
20:30 Japanese Jobless Rate Jan - - 3.7% 3.7%
20:30 Japanese Natl CPI YoY Jan - - 1.3% 1.6%
20:30 Japanese Natl CPI Ex Food, Energy YoY Jan - - 0.7% 0.7%
20:50 Japanese Industrial Production MoM Jan P - - 2.9% 0.9%
Weekly indicators
Date (Brazil) Time Indicator Reference forecast BES consensus Market Prior
21:00 Nzealand ANZ Activity Outlook Feb - - - - 53.5
21:00 Nzealand ANZ Business Confidence Feb - - - - 64.1
- - Brazilian Central Govt Budget Balance Jan R$ 23.0B - - R$ 14.5B
Friday 04:00 German Retail Sales MoM Jan - - 1.0% -1.7%
04:45 French Consumer Spending MoM Jan - - -1.0% -0.1%
05:00 Spanish CPI EU Harmonised YoY Feb P - - 0.3% 0.3%
07:00 Euro-Zone Unemployment Rate Jan - - 12.0% 12.0%
09:00 Chilean Manufacturing Index YoY Jan - - -2.5% 0.2%
09:00 Chilean Unemployment Rate Jan - - 5.9% 5.7%
09:00 Chilean Copper Production Total Jan - - - - 525,687
09:00 Chilean Retail Sales YoY Jan - - 5.8% 7.0%
10:30 Canadian Quarterly GDP Annualized 4Q - - 2.7% 2.7%
10:30 Brazilian Primary Budget Balance Jan R$ 27.0B - - R$ 10.4B
10:30 Brazilian Net Debt % GDP Jan 33.1% - - 33.8%
10:30 US GDP Annualized QoQ 4Q S - - 2.5% 3.2%
10:30 US Personal Consumption 4Q S - - 2.9% 3.3%
10:30 US Core PCE QoQ 4Q S - - - - 1.1%
11:45 US Chicago Purchasing Manager Feb - - 57.8 59.6
11:55 US Univ. of Michigan Confidence Feb F - - 81.2 81.2
12:00 US Pending Home Sales MoM Jan - - 2.7% -8.7%
12:15 US Fed's Stein, Kocherlakota, Evans and Plosser
speak in NY - - - - - - - -
12:30 BOE Governor Carney speaks in Frankfurt - - - - - - - -
13:00 Colombian National Unemployment Rate Jan - - - - 8.4%
17:30 Mexican Budget Balance YTD Jan - - - - -MXN375.3B
22:00 Chinese Manufacturing PMI Feb - - 50.1 50.5
- - Colombian CB sets the base interest rate 28-Feb - - 3.25% 3.25%
- - Brazilian CNI Consumer Confidence Feb - - - - 113.9
2012
2013 E
2014 E
2015 E
2016 E
National Accounts
GDP (BRL billion)
4,392.1
4,807
5,194
5,611
6,080
GDP (USD billion)
2,247.3
2,210
2,142
2,290
2,454
GDP - Real Growth (%)
0.87
2.2
2.0
2.0
2.5
Economic Activity
Industrial Production (%)
-2.58
1.14
2.5
2.5
3.0
Unemployment Rate (%) - average
5.51
5.39
5.5
5.9
6.3
Price Indices
IPCA - Consumer Price Index (%)
5.84
5.91
6.0
5.9
5.6
IGP-M - General Price Index (%)
7.82
5.51
5.8
5.6
5.1
IGP-DI - General Price Index (%)
8.10
5.52
5.7
5.6
5.1
Interest Rates
Selic Target - end of year (%)
7.25
10.00
10.75
11.75
9.75
Selic - average (%)
8.49
8.22
10.7
11.5
10.3
Real Interest Rate - Selic/IPCA (%)
2.51
2.18
4.5
5.4
4.5
TJLP - Long Term Interest Rates (%)
5.75
5.00
5.00
5.00
5.00
FX Rates
FX Rate - end of year (BRL/USD)
2.044
2.343
2.45
2.45
2.50
FX Rate - average (BRL/USD)
1.955
2.161
2.43
2.45
2.48
FX Rate - end of year (BRL/EUR)
2.696
3.219
3.14
3.06
3.13
FX Rate - average (BRL/EUR)
2.514
2.870
3.19
3.10
3.10
FX Rate - end of year (USD/EUR)
1.319
1.374
1.28
1.25
1.25
FX Rate - average (USD/EUR)
1.286
1.329
1.31
1.26
1.25
Balance of Payments
Exports (USD billion)
242.580
242.178
251.0
279.4
302.2
Imports (USD billion)
223.178
239.617
243.0
267.9
293.1
Trade Balance (USD billion)
19.402
2.561
8.0
11.5
9.1
Current Account (USD billion)
-54.249
-81.374
-77.1
-75.6
-78.5
Current Account (% of GDP)
-2.41
-3.68
-3.6
-3.3
-3.2
International Reserves (USD billion)
378.613
375.794
370.0
370.0
370.0
Sovereign Risk - end of year (bps)
142
224
250
250
250
Public Sector
Primary Fiscal Balance (% of GDP)
2.39
1.90
1.7
2.2
2.5
Nominal Fiscal Balance (% of GDP)
-2.48
-3.28
-3.7
-3.4
-2.8
Total Net Debt (% of GDP)
35.29
33.83
34.5
35.4
35.1
Contact information
ESPÍRITO SANTO INVESTMENT BANK | Brasil
Address: Av. Brigadeiro Faria Lima, 3729 – 9th floor - Itaim Bibi ZIP 04538-905 São Paulo – SP, BRAZIL
Telephone: + 55 11 3074 7444 Fax: + 55 11 3074 7469
E-mail: besinvestimento@espiritosantoib.com.br Ombudsman: 0800 77 00668
BES INVESTIMENTO DO BRASIL – BANCO DE
INVESTIMENTO Ricardo Espirito Santo Chief executive officer presidencia@espiritosantoib.com.br 11 3074 7388
Project Finance, Acquisition Finance , Structured
Trade Finance & Other Loans Alan Fernandes alanf@espiritosantoib.com.br 11 3074 7497 Capital Markets Miguel Guiomar mguiomar@espiritosantoib.com.br 11 3074 7443
Corporate Finance Maria Luiza Baroni mlbaroni@espiritosantoib.com.br 11 3074 7440
Fixed Income (Sales & Trading) & Treasury Roberto Simões rsimoes@espiritosantoib.com.br 11 3074 7383
Client Coverage Miguel Lins miguell@espiritosantoib.com.br
11 3074 7423 Silvan Suassuna ssuassuna@espiritosantoib.com.br
Geraldo Rinaldi grinaldi@espiritosantoib.com.br Eduardo Bierrenbach ebierrenbach@espiritosantoib.com.br Diogo Senra dsenra@espiritosantoib.com.br
BES Securities do Brasil – Brokerage house Rui Marques rmarques@espiritosantoib.com.br 11 3074 7103
BESAF – BES Ativos Financeiros – Asset Management Paulo Cesar Werneck pwerneck@espiritosantoib.com.br 11 3073 6235
Espirito Santo Serviços Financeiros – Wealth
Management José Carlos Mendes Domingos E. S. Pereira Coutinho jmendes@espiritosantoib.com.brdomingosc@espiritosantoib.com.br 11 3073 6262
2bCapital - Private Equity Manuel de Sousa mdesousa@2bcapital.com.br 11 3073 6255 Guilherme Rochlitz Quintão gquintao@2bcapital.com.br 11 3073 6288
Management Control, Risk Management & Investor
