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Weekly Report

January 12 to 16

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

ao público e obtidas de fontes consideradas confiáveis, porém, não garante sua precisão e abrangência. As considerações apresentadas no texto refletem apenas as opiniões atuais da área e estão

After the 2014 year-end holidays and a relatively calm start to 2015, market participants are slowly finding their

bearings and getting acquainted with news flows again. Abroad, activity indicators referring to advanced

economies and some central banks decisions in emerging countries – not to mention Chinese external data and

several Fed members’ speeches – should grab the attention of market participants. In Brazil, the economic

calendar will show some inflation figures, but the highlight should be activity-related data, with the BCB’s

economic activity indicator the most relevant one.

Brazil

The beginning of 2015 seems quite similar to what we have been observing on economic data recently: high

inflation figures and weak activity performance. After the disappointing industrial production result released last

week, which dropped 0.7% MoM sa in Nov14 versus expectation for a 0.5% MoM sa growth, market

participants will get acquainted with the behaviour of two important activity indices for Nov14. The Brazilian

official statistics bureau – IBGE – will release the performance of the retail sector next Wednesday and the

Brazilian Central Bank will release the readings of its monthly economic activity indicator — the so-called

IBC-BR — the following day. Despite our anticipation of some recovery in retail sales dynamics, it wouldn’t be

enough to guarantee a positive rate for the GDP’s monthly proxy.

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

According to our calculations, the narrower gauge for retail sales should have expanded 0.5% MoM sa in the period, while the broader index should

have grown 0.8% MoM sa. The difference between those measures is that the former factors out the performance of building material stores and

auto-parts and vehicles dealers. As we believe the vehicle sales in Nov14 were positive in that month, it should have added some strength to broad retail

sales. However, it is important to bear in mind that real income expansion is becoming slower and credit conditions stricter, therefore private

consumption is likely to remain weak for quite some time and we cannot rule out some deceleration in the coming months.

Chart 1: Retail sales gauges (2011=100, sa)

Source: Banco Central do Brasil, BESI Brasil.

- forecast

Despite the increase in Nov14 retail sales in our view offsetting part of the 0.7% MoM sa decline in the industrial sector registered in that month, the

IBC-BR — the index built by the Brazilian Central Bank to mimic the behaviour of the Brazilian GDP on a monthly basis – should have dropped 0.5%

MoM sa expansion in Nov14, according to our estimates. What’s more, if our estimates prove to be right, the carry-over estimate for the quarterly

expansion of the index in 4Q14 would reach -0.4% QoQ sa from 0.0% in the previous reading, thereby increasing chances of a negative print of the

GDP in the period. Taking into account that and the preliminary data released on industrial production for Dec14, a new wave of downward reviews to

GDP growth in 2014 and 2015 is likely to materialise soon. Currently, we forecast 0.1% for GDP expansion in 2014 and 0.4% in 2015.

(2)

Chart 2: CB's Activity index vs GDP (% QoQ sa)

Source: Banco Central do Brasil, BESI Brasil.

- forecast

Weekly indicators

Date

Time

(Brazil)

Indicator

Reference

BES

forecast

Market

consensus

Prior

Jan 12-13

--

Chinese Trade Balance

Dec

--

$49.00B

$54.48B

Jan 12-13

--

Chinese Exports YoY

Dec

--

6.0%

4.7%

Jan 12-13

--

Chinese Imports YoY

Dec

--

-6.2%

-6.7%

Jan 14-21

--

Brazilian Formal Job Creation Total

Dec

--

--

8.381

Jan 15-22

Brazilian Tax Collections

Dec

--

--

R$ 104.5B

Monday

05:30

Bank of France Bus. Sentiment

Dec

--

97.0

97.0

08:00

Brazilian IGP-M Inflation 1st Preview

Jan

0.34%

--

0.63%

08:30

Brazilian Central Bank Weekly Economists Survey -

IPCA 2015

9-Jan

--

--

6.56%

15:00

Brazilian Trade Balance Weekly

11-Jan

--

--

$355M

15:40

Fed's Lockhart Speaks in Atlanta

--

--

--

--

21:50

Japanese BoP Current Account Balance

Nov

--

¥139.5B

¥833.4B

Tuesday

03:00

Japanese Eco Watchers Survey Outlook

Dec

--

--

44.0

05:00

German Wholesale Price Index YoY

Dec

--

--

-1.1%

05:00

Brazilian FIPE CPI - Weekly

7-Jan

0.43%

--

0.42%

07:00

Italian Industrial Production MoM

Nov

--

0.1%

-0.1%

07:30

British CPI YoY

Dec

--

0.7%

1.0%

07:30

British CPI Core YoY

Dec

--

1.3%

1.2%

08:00

Merkel Gives Speech to Pro-European Unity Group

--

--

--

--

17:00

US Monthly Budget Statement

Dec

--

$24.0B

-$56.8B

17:00

Bank of Canada Timothy Lane Gives a Speech

--

--

--

--

20:00

Fed's Kocherlakota Speaks on Economic Outlook in

New York

--

--

--

--

Wednesday

05:45

French CPI EU Harmonized YoY

Dec

--

0.0%

0.4%

07:00

Italian CPI EU Harmonized YoY

Dec F

--

--

-0.1%

07:30

Italian General Government Debt

Nov

--

--

2157.5B

08:00

Euro-zone Industrial Production SA MoM

Nov

--

0.0%

0.1%

08:00

Merkel, Schaeuble, Draghi at Economic Conference

(3)

Weekly indicators

Date

Time

(Brazil)

Indicator

Reference

BES

forecast

Market

consensus

Prior

09:00

Brazilian Retail Sales MoM

Nov

0.5%

-0.5%

1.0%

09:00

Brazilian Retail Sales YoY

Nov

0.3%

-0.6%

1.8%

09:00

Brazilian Retail Sales Broad MoM

Nov

0.8%

1.0%

1.7%

09:00

Brazilian Retail Sales Broad YoY

Nov

-3.7%

-5.0%

-2.6%

11:00

US Fed's Plosser Speaks on the Economy in

Philadelphia

--

--

--

--

11:30

US Retail Sales Advance MoM

Dec

--

0.1%

0.7%

11:30

US Retail Sales Ex Auto MoM

Dec

--

0.1%

0.5%

11:30

US Import Price Index YoY

Dec

--

--

-2.3%

13:00

US Business Inventories

Nov

--

0.2%

0.2%

21:50

Japanese PPI YoY

Dec

--

2.1%

2.7%

21:50

Japanese Machine Orders MoM

Nov

--

4.6%

-6.4%

23:00

BoK 7-Day Repo Rate

15-Jan

--

--

2.00%

--

Polish Base Rate Announcement

14-Jan

--

2.00%

2.00%

Thursday

06:00

Spanish CPI EU Harmonised YoY

Dec F

--

-1.1%

-1.1%

07:00

German GDP NSA YoY

6-Jul

--

1.5%

0.1%

07:00

German Budget Maastricht % of GDP

2014

--

0.1%

0.1%

08:00

Brazilian FGV Inflation IGP-10 MoM

Jan

0.47%

--

0.98%

08:00

Euro-zone Trade Balance SA

Nov

--

20.0B

19.4B

08:30

Brazilian Economic Activity MoM

Nov

-0.5%

0.2%

-0.3%

08:30

Brazilian Economic Activity YoY

Nov

-2.5%

-0.9%

-1.2%

11:30

US Empire Manufacturing

Jan

--

5.0

-3.6

11:30

US PPI Final Demand YoY

Dec

--

1.0%

1.4%

11:30

US PPI Ex Food and Energy YoY

Dec

--

1.9%

1.8%

11:30

US Initial Jobless Claims

10-Jan

--

298K

294K

13:00

US Philadelphia Fed Business Outlook

Jan

--

20.0

24.3

19:00

Chilean Overnight Rate Target

15-Jan

--

3.00%

3.00%

21:00

Peruvian Reference Rate

Jan

--

3.50%

3.50%

Friday

05:00

German CPI EU Harmonized YoY

Dec F

--

0.1%

0.1%

08:00

Euro-zone CPI YoY

Dec F

--

-0.2%

0.3%

08:00

Euro-zone CPI Core YoY

Dec F

--

0.8%

0.8%

08:00

Brazilian FGV CPI IPC-S

15-Jan

1.14%

--

0.96%

10:50

Fed's Kocherlakota Speaks on Economy and

Monetary Policy

--

--

--

--

11:30

US CPI YoY

Dec

--

0.7%

1.3%

11:30

US CPI Ex Food and Energy YoY

Dec

--

1.8%

1.7%

12:15

US Industrial Production MoM

Dec

--

0.0%

1.3%

12:15

US Capacity Utilization

Dec

--

80.0%

80.1%

13:00

US U. of Mich. Sentiment

Jan P

--

94.1

93.6

16:10

Fed's Bullard Delivers Presentation on U.S. Economy

and Monetary Policy

--

--

--

--

19:00

US Total Net TIC Flows

Nov

--

--

$178.4B

--

Brazilian CNI Capacity Utilization (SA)

Nov

--

80.5%

80.6%

(4)

2012

2013

2014 E

2015 E

2016 E

National Accounts

GDP (BRL billion)

4.392,1

4.844,8

5.148

5.503

5.989

GDP (USD billion)

2.247,3

2.243,1

2.186

2.020

2.157

GDP - Real Growth (%)

1,03

2,49

0,1

0,4

2,5

Economic Activity

Industrial Production (%)

-2,58

1,14

-3,0

1,0

3,0

Unemployment Rate (%) - average

5,51

5,39

5,5

6,0

6,5

Price Indices

IPCA - Consumer Price Index (%)

5,84

5,91

6,41

6,5

5,8

IGP-M - General Price Index (%)

7,82

5,51

3,69

5,7

5,1

IGP-DI - General Price Index (%)

8,10

5,52

3,78

5,7

5,1

Interest Rates

Selic Target - end of year (%)

7,25

10,00

11,75

12,50

9,50

Selic - average (%)

8,49

8,22

10,90

12,5

10,5

Real Interest Rate - Selic/IPCA (%)

2,51

2,18

4,23

5,6

4,4

TJLP - Long Term Interest Rates (%)

5,75

5,00

5,00

5,88

6,00

FX Rates

FX Rate - end of year (BRL/USD)

2,044

2,343

2,656

2,75

2,80

FX Rate - average (BRL/USD)

1,955

2,161

2,355

2,72

2,78

FX Rate - end of year (BRL/EUR)

2,696

3,219

3,213

3,22

3,28

FX Rate - average (BRL/EUR)

2,514

2,870

3,128

3,22

3,25

FX Rate - end of year (USD/EUR)

1,319

1,374

1,210

1,17

1,17

FX Rate - average (USD/EUR)

1,286

1,329

1,329

1,18

1,17

Balance of Payments

Exports (USD billion)

242,578

242,034

225,101

234,0

253,1

Imports (USD billion)

223,183

239,634

229,031

230,0

248,8

Trade Balance (USD billion)

19,395

2,399

-3,930

4,0

4,3

Current Account (USD billion)

-54,249

-81,374

-88,0

-72,7

-69,0

Current Account (% of GDP)

-2,41

-3,63

-4,0

-3,6

-3,2

International Reserves (USD billion)

378,613

375,794

374,031

370,0

370,0

Sovereign Risk - end of year (bps)

142

224

259

250

250

Public Sector

Primary Fiscal Balance (% of GDP)

2,39

1,88

0,1

1,2

2,0

Nominal Fiscal Balance (% of GDP)

-2,48

-3,25

-5,7

-4,5

-3,6

Total Net Debt (% of GDP)

35,29

33,57

36,0

37,9

38,1

(5)

Contact information

BES Investimento do Brasil S.A. – Banco de Investimento

Address: Av. Brigadeiro Faria Lima, 3729 – 9

th

floor - Itaim Bibi

ZIP 04538-905 São Paulo – SP, BRAZIL

Telephone:

+ 55 11 3074 7444 / 3193 7444

Fax:

+ 55 11 3074 7469 / 3193 7469

E-mail:

besinvestimento@espiritosantoib.com.br

Ombudsman:

0800 77 00668

BES INVESTIMENTO DO BRASIL – BANCO DE INVESTIMENTO

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

Luciana Costa

laparecida@espiritosantoib.com.br

BES Securities do Brasil – Brokerage house

Rui Marques

rmarques@espiritosantoib.com.br

11 3074 7103

Management Control, Risk Management & Investor

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