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Market Economics | Latin America Weekly Summary - 26 October 2017

Core Content Overview

This weekly report provides an economic outlook and key event analysis for Latin America, focusing on Brazil, Mexico, Colombia, and Argentina. It outlines the anticipated economic data releases, central bank actions, and political developments, with an emphasis on inflation, growth, and monetary policy trends.

Key Events and Economic Outlook

Brazil

• Key Event: Copom minutes will highlight the potential end of rate cuts. The Selic rate is expected to remain at 7.5% after the latest 75bp cut.
• GDP Growth: Q3 GDP growth is expected to moderate to 0.2% q/q (sa), down from 0.6% q/q (sa) in Q2.
• Industrial Production: After a negative print in August (-0.8% m/m), September is expected to show 0.6% m/m growth, leading to 3.1% y/y annual growth.
• Political Developments: Congress may return to its reforms agenda after rejecting an investigation into President Temer. Social security reform is likely to be revisited.
• Other Indicators:
  • National unemployment rate is expected to be 12.3% for September.
  • Markit Brazil PMI Manufacturing for October is expected at 50.9.
  • CPI IPC-S for October is expected at 0.36% m/m and -1.28% y/y.

Mexico

• Key Event: Preliminary Q3 GDP data will be released on Tuesday, expected to show 0.2% q/q (sa) growth, down from 0.6% q/q (sa) in Q2.
• GDP Growth: Year-end 2017 GDP growth is forecasted at 2.0%.
• Industrial Activity: Manufacturing production is expected to grow 3% y/y in Q3, helping to support industrial production.
• Remittances: September remittances are expected to increase, with preliminary inflows suggesting a USD2.5bn total.
• Economic Drivers: Growth is expected to shift from consumption to production in the second half of the year. Uncertainty around NAFTA and elections could affect 2018 output potential.

Colombia

• Key Event: CPI numbers for September are expected to edge up to 4.1% y/y, above the target range.
• Inflation Components:
  • Non-tradable inflation is expected to remain above 5%.
  • Core inflation (ex-food) is forecasted at 4.76% y/y.
• Food Tracker: The mid-month food tracker is expected to be positive, with a forecast of 4.13% y/y for October, but volatility remains a risk.
• Year-End CPI Forecast: Reduced to 4.1% y/y due to unexpected food inflation and limited pass-through from international prices.

Argentina

• Key Event: BCRA unexpectedly raised the policy rate by 150bp, to 24.75%, with the first rate cut postponed to Q2 2018.
• Partial Activity Indicators: Expected to show ongoing growth, with industrial production likely to expand at 6.5% y/y and construction at 17% y/y.
• Economic Outlook: Forecasted to achieve 3% real GDP growth in 2017, followed by 4% in 2018.
• Tax Revenue: Expected to grow 31% y/y in October.
• Auto Sector: October auto sector data will provide insight into Q4 activity trends.

Economic Calendar Highlights (30 Oct – 4 Nov)

Summary of Main Trends

• Monetary Policy: Central banks in Brazil and Argentina are adjusting rates based on inflation and economic data, with Brazil likely to end rate cuts in 2017 and Argentina raising rates unexpectedly.
• Economic Growth: Growth is expected to moderate in Brazil and Mexico, while Argentina shows signs of continued expansion.
• Inflation Dynamics: Colombia's inflation is expected to remain above target, with core inflation showing some signs of moderation.
• Political Impact: Argentina's mid-term election results are positive for the economy, but structural reforms are unlikely in the short term.

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This document is non-independent research and is intended for professional clients and eligible counterparties. It may be subject to conflicts of interest and is not investment research. BNP Paribas may have financial interests in the entities mentioned and may have acted on the information before publication. It is not to be relied upon as authoritative or a substitute for independent judgment. The document is for internal use only and may not be reproduced or transmitted without permission.