Latin America Economics: The Week Ahead

A Roundup Of What To Watch Across The Region

Mexico

Retail stores likely began the year with weak sales, after a contraction at the end of last year. Consumers remained cautious in January as renewed uncertainty affected expectations. Spending continues to be restrained by potential risks on economic prospects and the political climate. Purchasing power continues to be affected by high inflation and interest rates. Employment’s continued advance has not been sufficient to absorb the additional labor force. It is expected the retail sales index to report an annual decrease of 1.5% for January, after a contraction of 2% in December and growth of 4.9% a year before.

Mexico’s trade account likely remained in negative territory, although the gap narrowed significantly. We expect a trade deficit of $750 million in February, after a negative result of $4.408 billion in January and a surplus of $759 million a year before. Even though exports advanced further, they were not able to surpass the value of imports, thus keeping the balance negative. Oil revenues kept improving as international prices recover. However, oil production remains restrained by the country’s limited capacity. Manufacturing sales to the U.S. market advanced further, particularly as the U.S. economy keeps progressing.

Argentina

The statistics office’s economic activity index (a proxy for GDP) likely increased 2.5% y/y in January, after 2% in the previous month. Recently released quarterly GDP figures showed some growth acceleration in the final quarter of 2017 supported by robust domestic demand growth. The economy expanded by 2.9% in 2017, after contracting 1.8% in the previous year. Growth will decelerate somewhat in the first half of 2018 due in part to the recent acceleration in inflation and some deterioration in confidence.

Industrial output likely expanded 3.5% y/y (NSA) in February, after 2.6% in the previous month. The ongoing construction boom has spurred domestic demand for cement, glass, steel and other materials. On the negative side, food processing output has performed poorly due in part to temporary supply restrictions. Manufacturing turned the corner in mid-2017 thus ending a two-year contraction. A more business-friendly environment and improving demand conditions will support the recovery in manufacturing output in 2018.

Brazil

Unemployment most likely reported a seasonal rebound in February caused by holidays. February is a month of the traditional celebration of Mardi Grass, when worker turnover increases, thus adding pressures to jobless people. Beyond that, the economy continues to strengthen at a steady pace. The continuous monetary easing and low inflation are providing some relief to consumer spending and consequently strengthening domestic absorption. Look for unemployment to have reached a rate of 12.7% in February, after 12.2% in January and 13.2% a year before.