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The rebound in the peso over the last few hours appears to have dissuaded Mexico’s central bank from raising interest rates at a press conference this morning. However, with the situation in markets still uncertain, our sense is that the central bank will …
9th November 2016
The sharp fall in Brazilian inflation in October is likely to be followed up by further declines over the coming months. Accordingly, barring a sustained drop in the real – the currency is down by 2.5% against the dollar in the aftermath of the US …
Chilean inflation surprised on the downside again in October and looks set to fall further over the coming months due to the fading impact of last year’s depreciation of the peso. This is likely to open a window for interest rate cuts, although for now, …
8th November 2016
If Donald Trump prevails in tomorrow’s US presidential election, our sense is that Mexican policymakers’ initial response would be to hike interest rates by 100-200bp at an emergency central bank meeting in an effort to support the peso. This may also be …
7th November 2016
The likely market sell-off in response to a victory for Donald Trump next week could push the Mexican peso to as low as 25/$. What happens to the peso beyond the initial sell-off would depend upon several factors, most notably the degree to which a Trump …
3rd November 2016
The small decline in Mexico’s manufacturing PMI in October suggests that the factory sector remains weak. And, with mining output still falling, industry as a whole is unlikely to be a major source of growth over the coming months. … Mexico Manufacturing …
1st November 2016
The 0.5% m/m increase in Brazilian industrial production in September only partly reversed the steep fall in August and means that the sector still contracted by around 1.0% q/q in Q3 as a whole. The good news is that the temporary headwinds that pulled …
A combination of shutdowns at several large auto plants and a drought-related drop in agricultural exports has set back the recovery in Brazil’s economy. Both headwinds should prove temporary, but our GDP Tracker suggests that the official national …
31st October 2016
Mexico’s economy grew by an impressive 1.0% q/q in Q3, the strongest rate since 2014. However, with growth being driven largely by the services sector and monetary policy set to tighten further, such a rapid pace of growth is unlikely to be sustained. … …
Central banks in several countries in Latin America are turning increasingly dovish. Policymakers in Brazil cut interest rates this month on the back of another drop in inflation and further (gradual) progress by the government on fiscal reforms. The …
Stronger-than-expected Chilean activity data for September suggest that GDP growth picked up to more than 2% y/y in Q3, which would be the strongest rate since the middle of 2015. While this wouldn’t completely rule out the possibility of interest rate …
28th October 2016
The restructuring of the short term dollar debt of Venezuela’s state-owned oil company has reduced the risk of default over the next twelve months, but only at the margin. What’s more, it has added to obligations due beyond 2017. Accordingly, with oil …
27th October 2016
Latin America’s financial markets have performed strongly this month thanks to rising commodity prices, as well as favourable political developments in the cases of Brazil and Mexico. The exception is Colombia, where the rejection of the government’s …
26th October 2016
Colombia’s much-anticipated tax reform bill is impressive and, if passed by Congress, would put the public finances on a more sustainable footing. However, it would create some near-term economic pain for the private sector. In particular, a 3%-pt hike in …
25th October 2016
The increase in Mexican inflation in the first half of this month, to 3.1% y/y from 3.0% y/y over the whole of September, was due largely to a rise in energy prices. While the recent rebound in the peso will have eased concerns at the central bank, the …
24th October 2016
Data to mid-October show that inflation in Brazil is continuing to ease, which should provide room for another cut in interest rates at November’s COPOM meeting. … Brazil IPCA-15 …
21st October 2016
Mexico’s faltering economy probably escaped recession in Q3 – but it’s a close call. Our GDP growth forecast for this year was already below consensus but we are nudging it down from 2.0% to 1.8%. Growth should pick up next year as the drag from mining …
20th October 2016
The decision by Brazil’s COPOM to cut the benchmark Selic interest rate by only 25bp (rather than 50bp), combined with a slightly less dovish accompanying statement than some had expected, reinforces our view that easing over the next 6-9 months will be …
The Argentine government’s recent upward revision to its 2017 budget deficit forecast has added to concerns that President Macri’s reform agenda is already starting to slow after less than a year in office. However, while it’s true that momentum has …
19th October 2016
Chile’s central bank left interest rates on hold at 3.50%, although the MPC appears to be divided over whether to flag rate cuts or not. For now, we expect signs that the economy is recovering keep the balance in favour of leaving policy on hold for a …
The pick-up in Peruvian economic activity in August was encouragingly broad-based and suggests that GDP growth rebounded back above 4% in Q3. … Peru Economic Activity …
14th October 2016
The Peruvian central bank’s decision to keep interest rates on hold at 4.25% didn’t come as a surprise, but we expect a pick-up in inflation next year to trigger more rate hikes than the consensus expects. … Peru: Interest rates to rise by more than most …
The 0.4% m/m drop in Mexican industrial production in August is disappointing coming on the back of three consecutive increases. Nonetheless, it largely reflected another sharp fall in mining output. In contrast, manufacturing production continued to …
12th October 2016
The increase in Mexican inflation in September, to 3.0% y/y from 2.7% y/y in August, means that headline CPI is now at the central bank’s target and leaves it on track to move above target over the coming months. We expect one further 50bp hike interest …
7th October 2016
The bigger-than-expected drop in Brazilian inflation in September should be enough to seal the deal on an interest rate cut at this month’s COPOM meeting. … Brazil & Chile Consumer Prices …
The 3.8% m/m drop in Brazilian industrial production in August isn’t quite as bad as it seems at first sight. Around two-thirds of the fall was due to a drop in vehicle output, which was affected by a temporary stoppage at the Sao Bernado VW plant. … …
4th October 2016
The slight increase in Brazil’s headline manufacturing PMI in September was encouraging, but a fall in the new export orders component could be an early sign that the rebound in the real over the past six months is taking its toll on external demand. …
3rd October 2016
Colombian voters’ rejection of the government’s peace deal with the FARC rebel group is unlikely to signal an immediate return to violence. And, while it is a significant blow to the economy’s medium-term prospects, the deal was never likely to radically …
Chilean activity data for August were mixed, but on balance they reinforce our view that a large part of Q2’s weakness was temporary. The early signs are that GDP growth picked up from 1.5% y/y in Q2 to around 1.8% y/y in Q3. … Chile Retail Sales, Ind. …
30th September 2016
The 50bp hike in Mexican interest rates (to 4.75%) at Thursday’s meeting was aimed squarely at supporting the peso. We expect another half-point increase at December’s meeting, taking rates to 5.25%. … Mexico raises rates to shore up the peso, further …
29th September 2016
The depth of Brazil’s recession has been blamed on everything from lower global commodity prices and tightening domestic credit conditions to poor infrastructure and excessive red tape. But this tendency to blame everything muddies the waters and makes it …
The sharp drop in the Mexican peso against the dollar this month, driven partly by Donald Trump’s surge in the US election polls, has increased the chances of an interest rate hike at Thursday’s MPC meeting. The markets are now pricing in a 50bp hike but …
28th September 2016
Donald Trump’s performance in last night’s first US presidential election debate doesn’t appear to have done himself any favours, but his election in November is still a real possibility. This would have significant repercussions for Mexico’s economy, …
27th September 2016
The bigger-than-expected drop in Argentine GDP in Q2 was alarming, but it was due largely to a slump in exports, which should be temporary. The pace of contraction in domestic demand eased and the early signs from our timelier Activity Indicator are that …
23rd September 2016
The rise in Mexican inflation in the first half of this month, to 2.9% y/y from 2.7% y/y over August as a whole, alongside the sharp drop in the peso over the past couple of weeks, means that there is a good chance of a 50bp interest rate hike (to 4.75%) …
22nd September 2016
Data to mid-September provide the first signs that Brazilian food inflation – which has been a source of recent concern for the central bank – is starting to ease. But while that could put an interest rate cut at October’s COPOM meeting in play, we …
The past month has seen governments across Latin America announce belt-tightening measures for 2017 as part of their continued efforts to repair balance sheets following the drop in commodity revenues. Mexico has unveiled another sizeable fiscal squeeze …
21st September 2016
Food inflation should ease over the coming months in Brazil and Colombia, which will help to bring down the headline inflation rates in both countries. By contrast, in Mexico, we expect the lagged impact of the peso’s recent falls to push food (as well as …
The mild pick-up in Peruvian economic activity growth in July was driven by a rebound in the country’s notoriously volatile fishing sector. Nonetheless, we expect growth in the rest of the economy to also strengthen over the remainder of Q3. … Peru …
15th September 2016
Brazil’s economy is bottoming out and, while the recovery will be slow going, our 2017 GDP forecast is a bit above consensus. Inflation should ease and, although COPOM will move gradually in the first instance, interest rates could fall to as low as …
An imminent restructuring of the short term dollar debt of Venezuela’s state-owned oil company, PDVSA, means that the severely cash-strapped government should avoid default over the next 12 months. However, with similarly large FX debt repayments falling …
14th September 2016
Q2 GDP data released across Latin America over the past month revealed that the mining sector was a key drag on growth in a number of economies. This looks set to continue as the lagged impact of lower commodity prices continues to weigh on mining …
13th September 2016
The 1.0% y/y drop in Mexican industrial production in July will grab the headlines, but this figure was distorted by working day effects. And the fact that output rose in seasonally-adjusted m/m terms for the third consecutive month suggests that the …
9th September 2016
August’s inflation data are not going to provide any reassurance to Brazilian policymakers that now is the time to begin lowering interest rates. The headline inflation rate rose to a three-month high, led by a further increase in food and transport …
Substantial cuts to government spending announced by Mexico’s new finance minister José Meade in the 2017 budget reinforce our view that GDP growth will be weaker than the consensus expects next year. The cuts fall unevenly on state-owned oil company …
The weaker-than-expected 2.7% y/y increase in Mexican consumer prices in August, coming alongside further government spending cuts expected to be announced in the 2017 budget later today, strengthens the case for interest rates to remain unchanged this …
8th September 2016
The sharp drop in Chilean inflation in August takes it firmly back within the central bank’s target range and reinforces our view that interest rates are likely to remain on hold for a prolonged period. … Chile Consumer Prices …
There is little doubt that the finances of Brazil’s State governments are in dire straits, but there is some confusion as to how this relates to the wider fiscal position. The key point is that the State’s finances are already captured in the broader …
6th September 2016
The fall in Brazil’s manufacturing PMI in August is disappointing, particularly coming on the back of consecutive increases in the previous two months. However, the decline was relatively modest and we don’t see this as a sign that the nascent …
1st September 2016
The bigger-than-expected 0.6% q/q drop in Brazil Q2 GDP was caused by another large fall in consumer spending. An improvement in investment should ensure that the economy returns to growth over the second half of this year but with consumers likely to …
31st August 2016
