Brazil IPCA, industry and retail, U.S. employment report – this week’s business highlights

RIO DE JANEIRO, BRAZIL – In the domestic agenda, the highlight will be the Extended Consumer Price Index (IPCA) for September, on Friday, October 8, expected to exceed 10% in 12 months, according to Bradesco and Itaú projections.

“After the Central Bank has shown renewed concern with short-term inflationary pressures, the IBGE’s release of consumer price data will provide valuable information to assess the persistence of recent shocks,” Bradesco points out.

The reading will likely be pressured by administered prices, notably electricity rates (impacted by a more expensive tariff flag) and gasoline. Itaú projects considerable increases in industrial items, and services (such as rent, airline tickets, and out-of-home meals). Also important, the core inflation measures will likely remain under pressure in this report, the bank’s economists say.

In addition, the IGP-DI for September will be released on Wednesday, with Itaú projecting a drop of 0.50% per month, pushing the annual rate to 23.49% (from 28.21% in August).

“The main factor should still be a significant deflation in iron ore prices, but wholesale agricultural prices should also register further deceleration at the margin, driven mainly by coffee and corn. On the other hand, consumer prices will remain pressured, notably by the increase in electricity bills,” they point out.

In terms of business activity, this week’s highlights will be August’s figures for industrial production on Tuesday, October 5, and retail sales on Wednesday, October 6.

“Regarding industrial production, we project stability at the margin. With respect to retail sales, we expect the expanded indicator to retreat by a seasonally adjusted 0.2%, while the core of the index should increase by 1.2% on a monthly comparison. The drop in the expanded retail sales results from the drop in both vehicle and construction material sales in the month,” point out Itaú’s economists.

Bradesco notes that the August industrial production will be relevant to measure the continuity of supply constraints in the sector.

In addition, September automobile production data from industry association ANFAVEA will be released on Wednesday.

“On the political front, discussions over court-ordered debts may continue in Congress, as the rapporteur of the constitutional amendment addressing the issue may present his report during the week. It is worth noting that recent news stressed the prospect of an extension of emergency aid benefits being included in the bill, an important point to be monitored,” Itaú points out.

Also on the radar, the National Petroleum Agency will offer 92 blocks with exploratory risk, located in 11 sectors in 4 Brazilian sedimentary basins: Campos, Pelotas, Potiguar and Santos. The agency expects concession contracts to be signed on March 31, 2022.

USA: EMPLOYMENT REPORT HIGHLIGHTED

In the U.S., attention will be focused on the release of the September employment data, on the same day as the IPCA, Friday,October 8.

“Conditions in the U.S. labor market are one of the main variables influencing the timing when the Federal Reserve will begin to withdraw monetary stimulus. Recent signaling by the FOMC that this may occur in its next meeting, in early November, increases the relevance of this announcement,” Bradesco points out.

Before that, on Wednesday, October 6, the ADP will release the data for job creation in the private sector in the country. On Tuesday, the ISM will be released for the September service sector.

In Europe, attention will also be focused on the composite PMI index released by Markit for the euro zone and the UK, both on Tuesday morning.