Brazil: Inflation takes main stage in a crowded week - Rabobank

Rabobank analysts suggest that they continue to look for a GDP growth of 0.4% y/y for 19Q2 of Brazilian economy, consistent with a flat sequential reading.

Key Quotes

“The coming week brings a crowded macro agenda, featuring events on the realm of consumer inflation, balance of payments, fiscal policy and real activity. The highlight is July IPCA-15 inflation (Tue.), and we look for a reading of 0.15% m/m. Our estimate implies that the annual IPCA-15 change will drop to 3.3% y/y (from Jun: 3.8% y/y), taking the index way below the BCB’s mid-target (4.25% for 2019). The key point is that July IPCA-15 numbers will reaffirm a lack of demand-led pressures, reflecting an environment with anchored inflation expectations, wide economic slacks, and tame FX rate.”

“Other noteworthy macro events scheduled for the week are FGV´s July confidence surveys for different sectors (e.g. consumer, retail, construction, industry). The takeaway is: with the passing of the pension reform (in first round) at the Lower House, will the negative economic sentiment of late take a consistent U-turn? We believe so.”

“On politics, the focus is on the newest package of measures to boost short-term consumption. Media reports indicate that the Ministry of Economy mulls the release of up to BRL 30 billion (0.4% of GDP) to be withdrawn from these accounts. In our view, this one-off stimulus can only attenuate the short-term pain on economic activity, possibly adding a couple of tenths to GDP growth this year.”