Weekly agenda: Inflation in Brazil and Mexico; economic activity in Argentina and Peru

This week, the inflation figures for the first half of August in Latin America’s two largest economies, Brazil and Mexico, will be released.

In the case of the former, the figure will influence market expectations for the central bank’s September meeting.

In parallel, the presidential race is heating up, and the leading candidates will be interviewed on prime-time television (President Jair Bolsonaro on Monday and former President Luiz Inácio Lula da Silva on Thursday).

Likewise, parties and candidates will have television and radio slots for their campaign messages starting on Friday.

“In Mexico, inflation during the first two weeks of August is likely to extend its upward trend,” projected economists Adriana Dupita and Felipe Hernández of Bloomberg Economics.

They added that revised second quarter GDP figures might confirm the increase in activity and domestic demand.

On the other hand, analysts said that the minutes of the Mexican central bank’s August meeting should reiterate future guidance for additional interest rate hikes this year.

Meanwhile, in Argentina, the economic activity data for June will be released, which, according to Dupita and Hernández, should reinforce the expectation of positive growth in the second quarter but may show weakness at the margins.

In Peru, second-quarter GDP data will be released. According to Dupita and Hernandez, they should show a quarter-on-quarter decline, in line with the tapering of fiscal and monetary stimulus and headwinds caused by increased political noise and tightening external financial conditions.

BRASIL

Brazil’s consumer price index for the first half of the month is released on Wednesday, August 24. According to Dupita and Hernandez, the residual effect of tax cuts in July and falling fuel prices should push deflation into the reading.

MEXICO

As in Brazil, in Mexico, on August 24, how inflation evolved in the first half of the month will be known. “Inflation probably reached 8.61% year-on-year in the first two weeks of August, up from 8.14%,” wrote Dupita and Hernandez.

According to the analysts, higher core inflation and government- and energy-regulated inflation should lead to a rebound. They further detailed that sequential data and core metrics may point to continued upward pressure on prices from supply shocks, rising costs, and price indexation.

Mexico’s final GDP data for the second quarter of this year will be released on Thursday, August 25. Dupita and Hernandez estimate that growth will remain at 2.1% y-o-y, as reported in July. Activity is still below its pre-pandemic level and potential.

Also, on Thursday 25, the minutes of the Mexican central bank’s last monetary policy meeting are released. The minutes are expected to better explain the monetary authority’s unanimous decision to raise its benchmark rate by 75 basis points to 8.5% at its August meeting and give a better idea of the outlook for monetary policy.

Finally, Mexico’s trade balance for July will be released on Friday, August 26. According to Dupita and Hernandez, it will likely have registered a deficit of US$5.6 billion. It compares to a US$3.96 billion gap in June and a US$4 billion deficit a year earlier.

Lower exports should explain the month-to-month difference and higher imports, the year-on-year variation.

ARGENTINA

Argentina’s economic activity index for June is released on Tuesday, August 23.

“Argentine activity probably lost steam in June, ahead of the political turmoil that led to two changes at the helm of the Ministry of Economy,” wrote Dupita and Hernandez.

Growing political uncertainty, the stimulus withdrawal’s initial effects, and the reopening’s waning impact likely drove the slowdown.

If confirmed, the result would bring the indicator’s three-month average, a very good indicator of quarterly GDP, to a 0.6% expansion from the first quarter and a 6% increase from a year earlier.

PERU

On Monday, August 22, Peru’s second-quarter GDP will be released. According to estimates by Dupita and Hernandez, Peru’s Gross Domestic Product is likely to have increased by 3.3% in the second quarter from the same period last year, in line with monthly activity index data through June.

The average growth over the last four quarters would be close to 5.4%, slightly above the central bank’s projections for a small negative output gap this year and next. That implies the GDP fell from the previous quarter after a 0.9% advance in the first quarter.

With information from Bloomberg

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