Conditions improve, but activity remains depressed

The latest activity data from across Latin America have been encouraging, but the bigger picture is that the region’s economy is still struggling. Industrial and retail output in Brazil fell at a slower pace in February than January. At the same time, Mexican retail spending growth surged, while the export-oriented manufacturing sector grew strongly. Activity data also improved in the Andes. However, some of the recent strength may have been due to the leap year, which meant there was one extra working day in February of this year compared to last. This suggests that the improvement may not be sustained over the coming months. More generally, our GDP Tracker suggests that output in the region as a whole probably still fell by around 1.5% y/y over Q1, a similar pace of contraction to Q4. We still expect the continued rebound in commodity prices to support a return to growth in the second half of this year. But for now, despite February’s uptick, Latin America’s economy is still stuck in the doldrums.