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280 matches for " external":
Brazil's external accounts continue to surprise to the upside, with the current account deficit remaining close to historic lows and capital flows performing better than anticipated, mostly due to higher-than- expected FDI.
Brazil's external accounts remain solid, despite the recent modest deterioration, making it easier for the country to withstand external and domestic risks.
Data later today will likely show that the Eurozone's external balance remained firm last quarter at a record 2.5% of GDP. We think the seasonally adjusted current account surplus rose to €20.0B in December from €18.1B in November, with positive momentum in the key components continuing.
The Asian PMIs point to a strengthening manufacturing sector in September but external demand is the driver.
Brazilian assets were hit in Q3 by global external challenges, while domestic fundamentals gradually improved.
Brazil's external accounts were a relatively bright spot last year, once again.
Brazil's external accounts were a relatively bright spot again last year.
Brazilian financial assets lately appear to be responding only to developments in the presidential election race and external jitters.
Brazil's external accounts are well under control, despite the wider deficit in January, mainly driven by seasonal deterioration on the trade account.
The Eurozone's external surplus rebounded over the summer, reversing its sharp decline at the start of Q3.
Data released on Monday showed that Chile's external accounts remained under pressure at the start of the year, and trade tensions mean that it will be harder to finance the gap.
External conditions continue to favour Brazil. The recovery in domestic demand in the world's major economies, particularly the rebound in business investment, has driven a gradual revival of global exports.
External conditions are becoming more demanding for LatAm economies, with global trade tensions intensifying in recent weeks.
Colombia's GDP report, released last week, confirmed that it was the fastest growing economy in LatAm and everything suggests that it likely will lead the ranking again this year.
The U.K.'s balance of payments leaves little room for doubt that sterling would sink like a stone in the event of a no-deal Brexit.
Data released in recent days confirm the story of a struggling economy and falling inflation pressures in Mexico, strengthening our forecast of interest rate cuts over the second half of the year.
Data released yesterday confirm that Brazil's recovery has continued over the second half of the year, supported by steady capex growth and rebounding household consumption.
Mr. Abe yesterday called a snap general election, to be held on October 22nd; more on this in tomorrow's Monitor. For now, note that the election comes at a reasonably good stage of the economic cycle, hot on the heels of very rapid GDP growth in Q2, while the PMIs indicate that the economy remained healthy in Q3.
Colombia was the fastest growing LatAm economy in 2019, due mostly to strong domestic demand, offsetting a sharp fall in key exports.
Colombia has been one of LatAm's outperformers this year.
Data released this week in Brazil underscored the effect of weaker external conditions. This adds to the poor domestic demand picture, which has been hit by high, albeit easing, political uncertainty.
Thursday and Friday were busy days for LatAm economy watchers. In Brazil, the data underscored our view that the economy is on the mend, but the recent upturn remains shaky, and external risks are still high.
Mexico's economy continues to bring good news, despite the tough external environment for all EM economies. According to the economic activity index, a monthly proxy for GDP, growth gained further momentum in Q4. Activity rose 2.7% year-over-year in November, supported by stronger services activities, which expanded 0.3% month-to-month. The services sector has been the main driver of the current cycle, growing 3.8% year-over-year in November, bolstering our optimism about the domestic economy in the near-term.
The key story in Brazil this year remains one of gradual recovery, but downside risks have increased sharply, due mainly to challenging external conditions.
The data tell an increasingly convincing story that the Eurozone's external surplus rose further in the second half of last year.
Yesterday's first estimate of full-year 2019 GDP in Mexico confirmed that growth was extremely poor, due to domestic and external shocks.
Brazil's external accounts have recovered dramatically this year, and we expect a further improvement--albeit at a much slower pace--in the fourth quarter. The steep depreciation of the BRL last year, and the improving terms of trade due to the gradual recovery in commodity prices, drove the decline in the current account deficit in the first half.
Incoming activity data from Colombia over the past quarter have been surprisingly strong, despite many domestic and external threats.
Global current account imbalances are back on the agenda. In the U.S., economic policies threaten to blow out the twin deficit, while external surpluses in the euro area and Asia are rising.
Governor Kuroda commented yesterday that he doesn't think Japan needs more easing at this stage. If he means that the BoJ does not have to change policy to provide more easing then we think he is right, on two and a half counts. First, Japan is likely to receive a boost under its current framework as external rate rises exceed expectations, driving down the yen.
Long-standing readers will know that we have been downbeat on the potential for net external trade to boost the economy following sterling's 2016 depreciation.
Brazil's recovery has been steady in recent months, and Q1 likely will mark the end of the recession. The gradual recovery of the industrial and agricultural sectors has been the highlight, thanks to improving external demand, the lagged effect of the more competitive BRL, and the more stable political situation, which has boosted sentiment.
Brazil's external accounts continue to be the country's bright spot, having improved considerably in recent quarters. The unadjusted current account deficit for January, USD4.8B, was lower than expected and much smaller than the USD12.2B shortfall a year earlier.
The external environment was relatively benign for China in July. The euro and yen appreciated as markets began to question how long policy can remain on their current emergency settings.
The MXN remains the best performer in LatAm year-to-date, despite some ugly periods of high volatility driven by external and domestic threats.
The U.K.'s dependence on large inflows of external finance was laid alarmingly b are last week, when "hard" Brexit talk by politicians caused overseas investors to give sterling assets a wide berth. Investors now are demanding extra compensation for holding U.K. assets, because the medium-term outlook is so uncertain.
The Eurozone's total external surplus hit the skids at the start of the year. Yesterday's report showed that the seasonally adjusted current account surplus plunged to a two-year low of €24.1B in January, from a revised €30.8B in December.
The Eurozone's external surplus weakened at the start of Q3.
The Eurozone's external surplus recovered a bit of ground mid-way through the third quarter.
Banxico's decisions throughout the past year have been guided by external forces, dominated by the persistent decline of the MXN against the USD and its potential impact on inflation. The MXN has fallen by almost 17% year-to-date and has dropped by an eye-watering 37% since 2014.
Mexico's final estimate of third quarter GDP, released yesterday, confirmed that the economy is still struggling in the face of domestic and external headwinds.
Solid trade data for April indicate a strong start to Q2 for the Eurozone's external balance, though a €3.2B fall in German net factor income will weigh on the primary income number.
Mexican manufacturing data continue to offer a counterweight to strong consumers' spending and services numbers. Output in the key manufacturing sector contracted by 0.2% month-to-month in September, due mainly to severe external headwinds. But the year-over-year rate was unchanged at 3.3%, with a flat underlying trend. Total industrial output, by contrast, rose 0.4% month-to-month in September, pushing the year-over-year rate up to 1.7%, from an upwardly-revised 1.1% gain in August.
Colombia's industrial and retail sectors surprised to the upside in August, suggesting that the domestic economy has been resilient during most of the third quarter, despite the hit from an array of external headwinds. Industrial production increased by a solid 2.6% year-over-year in August, up from an upwardly revised 0.6% expansion in July, and above its recent trend. In the first half of the year, industrial activity fell on average by 1.1%, the worst performance since 2013, due mainly to the oil hit and ex tended works at Reficar, the country's second biggest oil refinery. But Colombia's manufacturers appear to have shrugged off part of the oil pain in recent months.
Growth momentum in Mexico has improved marginally over the last few months after the soft patch during the first quarter, with business and households gaining confidence in the economic recovery. But the upswing has been rather modest, due to the volatility in global financial markets and the challenging external environment. The outlook for the global economy has deteriorated over recent months due to China's problems, and commodity prices remain under pressure. All these factors are now weighing on investors' confidence and hurting EM across asset classes.
Mexican economic growth was subdued during the first half of the year, and we expect it to remain weak over the coming months. The economy has been held back largely by external headwinds, especially low oil prices and disruptions to activity in the US, its main trading partner.
Brazil's external accounts were a bright spot last year, again.
Yesterday's industrial production report in Mexico added weight to the idea that the sector improved marginally in the first quarter, despite many external threats. Industrial output rose 0.1% month-to-month in February, following a similar gain in January. The calendar-adjusted year-over-year rate rose to -0.1%, after a modest 0.3% contraction in January.
Brazil's external accounts remain solid, despite the recent modest deterioration.
Colombia's GDP growth was a poor 1.6% year-over- year in Q4, down from 2.3% in Q3, despite the oil recovery and the COP's rebound since mid-year. GDP rose a modest 0.3% quarter-on-quarter, after a 0.8% increase in Q3.
Chile's Q4 GDP report, released yesterday, confirmed that the economy accelerated at the end of last year, supported by rising capex and solid consumption.
We doubt that this week will see the MPC joining the list of other major central banks that have abandoned plans to raise interest rates this year.
"Disappointing" is probably the word that most EZ equity investors would use to describe their market so far this year.
No subject in the EZ economy is a source of more dispute than Germany's ballooning current account surplus. The Economist recently identified he German surplus as a problem for the world economy.
The global coronavirus pandemic is hitting the LatAm economy at a particularly vulnerable time, following last year's stuttering economic recovery, temporary shocks in key economies and the effect of the global trade war.
Brazil's monetary authority adopted a neutral tone and kept its main rate on hold at 6.5% at its monetary policy meeting on Wednesday, surprising investors.
Our colleagues have been telling some unpleasant stories recently.
Japan's economic data have been very volatile in the last 18 months.
This has been a very complicated week for LatAm policymakers, who are particularly uneasy about the performance of the FX market.
China's trade surplus bounced back strongly in May, rising to $40.1B on our adjustment, from $35.7B previously.
Recent inflation numbers across the biggest economies in LatAm have surprised to the downside, strengthening the case for further monetary easing.
This week, Mexico's government unveiled its 2020 fiscal budget proposal.
Central bankers globally are full of market- appeasing but conditional statements.
The U.K.'s still-large current account deficit makes us nervous that sterling will need to depreciate further over the medium-term and would collapse if Brexit talks fail, causing international investors to take flight.
The upturn in the new monthly measure of GDP in May, released yesterday, was strong enough--just--to suggest that the MPC likely will raise Bank Rate at its next meeting on August 2.
In this Monitor we'll let the data be, and try to make some sense of the recent market volatility from a Eurozone perspective, with an eye to the implications for the economy and policymakers' actions.
Inflation pressures are gradually easing in Mexico, opening the door for rate cuts as early as next month. The June CPI report, released yesterday, showed that prices rose 0.1% month-to-month unadjusted in June, in line with market expectations.
Recent inflation and activity data in Mexico were dovish.
The hard data now point to a horrendous Q3 GDP print in Germany, which almost surely will constrain the advance EZ GDP print released on October 30.
Japan's Q3 real GDP growth was revised up substantially to 0.6% quarter-on-quarter in the final read, compared with 0.3% in the preliminary report.
Chile's market volatility and high political risk continue, despite government efforts to ease the crisis.
Overall, the Chinese October data paint a picture of continued weakness in trade, with PPI inflation still high but the rate of increase finally slowing.
Survey data have been signalling a resilient Brazilian economy in the last few months, despite the broader challenges facing LatAm and the global economy in 2019.
Evidence of accelerating economic activity in Colombia continues to mount, in stark contrast with its regional peers and DM economies.
Recent data in Argentina confirm the resilience of cyclical upturn.
The BoJ yesterday kept the policy balance rate at -0.1%, and the 10-year yield target at "around zero", in line with the consensus.
We agree wholeheartedly with the consensus view that the economy would enter a recession in the event of a no-deal Brexit on October 31.
Italy is edging closer to a coalition government with the Five-Star Movement, the Northern League, and Forza Italia at the helm.
The latest national accounts show that the economy is holding up much better in the face of heightened Brexit uncertainty than previously thought.
Japanese PPI inflation continues to be driven mainly by imported metals and energy price inflation. Metals, energy, power and water utilities, and related items, account for nearly 30% of the PPI.
Chile's Q3 GDP report, released yesterday, confirmed that the economy gathered speed in the third quarter, but this is now in the rearview mirror.
The RMB has risen strongly in recent months, initially with the euro and the yen, but China's currency rose on a trade-weighted basis in August.
Private consumption remains resilient in Brazil and recent data suggest that growth will continue over the coming months.
Colombia's December activity reports confirmed that quite strong retail sales last year were less accompanied by local production, which became only a minor driver of the economic recovery, as shown in our first chart.
With campaigning for the general election intensifying last week, it was unsurprising that October's money and credit release from the Bank of England received virtually no media or market attention.
Argentina's Recession Has Ended, Supporting Mr. Macri's Odds
The minutes from Banxico's August 11 monetary policy meeting--in which Board members unanimously voted to keep rates on hold at 4.25%--confirmed that the bank's policy guidance remains broadly neutral. Subdued economic activity, favourable inflation and gradual fiscal consolidation explain policymakers' position.
The alarming pace at which the Government is marching towards the Brexit cliff edge still shows no sign of instilling panic among households or firms.
The massive hit from low oil prices, Covid-19 and President AMLO's willingness to call snap referendums on projects already under construction is putting pressure on Mexico's sovereign credit fundamentals and ratings.
Further political wrangling yesterday distracted from data showing that the risk of no -deal Brexit is placing increasing strain on the economy.
Hard data released in Argentina over recent weeks showed that the economy was resilient in Q1 and early Q2.
The deterioration of global risk appetite and, in particular, domestic politics have put the Brazilian real under severe pressure in recent weeks.
Chile's stronger-than-expected industrial production report for December, and less-ugly-than- feared retail sales numbers, confirmed that the hit from the Q4 social unrest on economic activity is disappearing.
Inflation in Mexico remains relatively sticky, limiting Banxico's capacity to adopt a more dovish approach, despite the subpar economic recovery.
Data released last week confirm that the Argentinian economy ended 2017 strongly.
Yesterday's money supply data in the Eurozone were solid across the board.
In the last few weeks markets have been treated to the news that euro area industrial production crashed towards the end of Q4, warning that GDP growth failed to rebound at the end of 2018 from an already weak Q3.
LatAm financial and FX markets have behaved relatively well in recent sessions, thanks to the array of monetary and fiscal measures taken to counter the severe risk-off environment.
Data released this week have confirmed that the Mexican economy is struggling and that the near-term outlook remains extremely challenging.
The news in Brazil on inflation and politics has been relatively positive in recent weeks, allowing policymakers to keep cutting interest rates to boost the stuttering recovery.
We're maintaining our estimate of Mexico's Q2 GDP growth, due today, namely a 0.2% year- over-year contraction, in line with a recent array of extremely poor data.
Monday will see 5% tariffs going into effect on Mexican exports to the U.S.--which totalled about USD360B last year--unless President Trump steps back from the brink.
Chile's near-term economic outlook is still negative, but clouds have been gradually dispersing since late Q4, due mostly to better news on the global trade front, China's improving economic prospects, and rising copper prices.
New orders data increasingly suggest that German manufacturers all but shut their production lines at the start of the year.
Headline inflation in Brazil remained low in October, and even breached the lower bound of the BCB's target range.
Chile's inflation outlook remains benign, allowing policymakers to cut interest rates if the economic recovery falters.
The ECB made no major policy changes yesterday, but tweaked its communication. The key refinancing and deposit rates were kept at 0.00% and -0.4%, respectively, and the pace of QE was maintained at €30B per month.
The Brazilian central bank cut the benchmark Selic interest rate by 25bp, to 4.25%, on Wednesday night, as expected.
China last week banned unlicensed micro-lending and put a ceiling on borrowing costs for the sector, in an effort to curtail the spiralling of consumer credit.
On a headline level, last week's European Parliament elections were an excellent occasion for the EU.
As we showed in yesterday's Monitor--see here--EZ governments and the ECB have thrown caution to the wind in their efforts to limit the pain from the Covid-19 crisis.
The most positive thing to say about the EZ manufacturing PMI at the moment is that it has stopped falling.
We sympathise if readers are sceptical of our opening gambit in this Monitor.
Brazil's December industrial production report, released yesterday, confirmed that the recovery was stuttering at the end of last year.
Survey data in EZ manufacturing remain soft. Yesterday's final PMI report for August confirmed that the index dipped to 54.6 in August, from 55.1 in July, reaching its lowest point since the end of 2016.
Retail sales in Mexico fell in Q4, but we think households' spending will continue to contribute to GDP growth in the first quarter, at the margin.
Recently released data in Colombia signal that the economy ended last year quite strongly.
Brazil's current account data last week provided further evidence of stabilisation in the economy, despite the modest headline deterioration. The unadjusted current account deficit increased marginally to USD5.1B in January, from USD4.8B in January 2016, but the underlying trend remains stable, at about 1.3% of GDP. Our first two charts show that the overall deficit began to stabilize in mid-2016, as the rate of improvement in the trade balance slowed, reflecting the easing of the domestic recession.
The details of next year's Japanese budget are not yet official and the Chinese budget remains unknown. But the main figures of the Japanese budget are available, while China's Economic Work Conference, which concluded yesterday, has set out the colour of the paint for the budget, if not the actual brush strokes.
Data released on Friday confirmed that Colombian activity lost momentum in Q4, following an impressive performance in late Q2 and Q3. Retail sales rose 4.4% in November, down from 7.4% in October and 8.3% in Q3.
Chile's Q1 GDP report, released yesterday, confirmed that the economy weakened sharply at the beginning of the year, due mainly to temporary shocks, including adverse weather conditions.
Most LatAm currencies have been under pressure recently, with the Brazilian real and the Chilean peso breaking all-time lows versus the USD in recent weeks.
The BoJ left policy unchanged yesterday, but we noted some significant additions and modifications in the statement and the press conference.
Chile's Q3 GDP report, released yesterday, confirmed that the economy lost momentum in the last quarter.
Headline M3 money supply growth in the Eurozone was steady as a rock at around 5% year-over-year between 2014 and the end of 2017.
Officially, China's real GDP growth was unchanged at 6.0% year-over-year in Q4; low by Chinese standards, but not overly worrying. Full-year growth was 6.1% within the 6.0-to-6.1% target down from 6.7% last year, also in keeping with the authorities' long-term poverty reduction goals.
Eurozone current account data yesterday provided further evidence of stabilisation in the economy despite a headline deterioration. The adjusted current account surplus fell to €18.1B in November from a revised €19.5B in October, but the decline was mainly driven by an increase in current transfers; the core components remain solid.
Economic and financial conditions continue to deteriorate sharply in LatAm.
The euro area's trade advantage with the rest of the world slipped at the start of the year.
Mr. Draghi's speech to the European Banking Congress on Friday--see here--was a timely reminder to markets that the ECB is in no hurry to make any changes to its policy setting.
Data on EZ consumption were soft while we were enjoying our Christmas break. The advance EC consumer confidence index slipped to a three-year low of -8.1 in December, from -7.2 in November, breaking its recent tight range.
The EU Commission and Italy's government remain at loggerheads over the country's fiscal plans next year.
The Brazilian BRL has remained relatively stable year-to-date, following a strong rebound in January. But downward pressures have re-emerged over the last two months, as shown in our first chart.
Korea's preliminary Q4 GDP report was stronger than nearly all forecasters, including ourselves, expected.
Data released yesterday confirmed that Mexico's economy ended Q4 poorly, confounding the most hawkish Banxico Board members.
Eurozone bond traders of a bearish persuasion are finding it difficult to make their mark ahead of Italy's parliamentary elections next weekend.
The dovish members of Banxico's board garnered further support on Friday for prolonging the current easing monetary cycle over coming meetings.
Yesterday's detailed GDP data in Germany confirmed that the economy shrank slightly in the second quarter, by 0.1% quarter-on-quarter, following the 0.4% increase in Q1.
The BRL remains under severe stress, despite renewed signals of a sustained economic recovery and strengthening expectations that the end of the monetary easing cycle is near.
In a relatively light week in terms of economic indicators in Brazil, the inflation numbers and the potential effect of the recent BRL sell-off garnered all the attention.
Friday's economic reports delivered more sobering news for the euro area economy.
The BoJ voted by an 8-to-1 majority yesterday to keep the policy balance rate unchanged at -0.1%, with the 10-year yield curve target also unchanged at around zero.
Two major themes emerged from the Chinese Party Congress last week, namely, further opening of the financial sector to foreigners, and the threat of a Minsky moment.
In Brazil, last week's formal payroll employment report for March was decent, with employment increasing by 56K, well above the consensus expectation for a 48K gain.
This week's key data releases in Mexico likely will reaffirm that growth remains below trend, while inflation continues to ease.
Chinese New Year effects were very visible in Japan's December trade data. Export growth slowed sharply to 9.3% year-over-year in December, from 16.2% in November.
LatAm assets and currencies had a bad November, due to global trade war concerns, the USD rebound and domestic factors.
Today's FOMC announcement will be something of a non-event. Rates were never likely to rise immediately after December's hike, and the weakness of global equity markets means the chance of a further tightening today is zero.
Federal Reserve Chair Janet Yellen's testimony this week reinforced our view that the first U.S. rate hike will be in June. The transition to higher U.S. rates will require an unpleasant adjustment in asset prices in some LatAm countries.
Data last week confirmed that Peru's economic growth slowed sharply in the first half of the year, due to the damaging effects of the global trade war hitting exports.
Friday's detailed GDP data in Germany confirm that the euro area's largest economy performed strongly in the second quarter.
Brazil's current account deficit is stabilizing following an substantial narrowing since early 2015, thanks to the deep recession.
Brazil's current account deficit rose to USD6.9B in April, from USD5.8B in March. The deficit totaled USD100.2B, or 4.5% of GDP on a 12-month rolling basis, marginally better than 4.6% in March; the underlying trend is flat. The services and income accounts improved slightly compared to April last year.
Data released yesterday show that the Chilean economy had a weak start to the second half of the year.
Mexico's economy gathered momentum in Q3, thanks mainly to solid gains in industrial and services activity. Real GDP rose 0.8% quarter-on-quarter in Q3, the fastest pace since Q3 2013 and the ninth consecutive increase. Year-over-year growth rose to 2.6% year-over-year, from 2.3% in Q2. In short, a positive report, surprising to the upside, and above the INEGI's advance estimate, released in late October.
The picture of the economy's recent performance will be redrawn today, when the national accounts are published.
We expect growth in Latin America--except Mexico--to improve in 2017, especially during the second half...
Mexican industrial production data for August were a little stronger-than-expected. Output rose 1.0% year-over-year, for the second consecutive month, and marginally higher than the 0.6% average growth in the second quarter. The rise in production in August is encouraging, especially the strong manufacturing component, which accounts for about half of all output.
The ramifications of continued disappointing Asian growth, particularly in China, and its impact on global manufacturing, are especially hard-felt in LatAm.
Economic growth in Colombia and--especially-- Chile, braked in the fourth quarter and at the start of this year as the strong USD drove up imported good prices and tepid global demand weighed on exports. Colombia's January exports plunged 36.6% year-over-year, even worse than the 35% average drop in Q4.
LatAm Cyclical Recovery is Set to Resume, but Threats Still Remain
The news-flow in the Eurozone was almost unequivocally bad over the summer.
Net exports should come roaring back as a driver of Eurozone GDP growth in the second quarter. The euro area trade surplus leapt to €24.3B in April, a new all-time high, up from a revised €19.9B in March. A 1.7% month-to-month fall in imports--mean-reversion from a 3.9% increase in March--was a big contributor to the higher surplus.
Mexico's election results are not available as we go to press, but we're expecting a comfortable win for the left-wing populist candidate, AMLO.
Recent global developments lead us to intensify our focus on trade in LatAm.
Chile's Q2 GDP report, released yesterday, confirmed that the economy gathered strength in the first half of the year, consolidating a strong recovery that started in Q3 2017.
Mexican president-elect Andrés Manuel López Obrador, known as AMLO, has set out the first points of his austerity plan, two weeks after his overwhelming victory at the polls.
Peru's economic recovery gathered strength late last year.
Policymakers and governments are gradually deploying major fiscal and monetary policy measures to ease the hit from Covid-19 and the related financial crisis.
In one line: Disappointing, and the outlook remains challenging due to high external risks.
Activity in Colombia cooled at the end of the first quarter, in the face of many domestic and external headwinds. Retail sales, for example, plunged 2.9% in March after a 4.6% leap in February. The headline likely was depressed by the early Easter, as March had one fewer trading day than February.
Inflation pressures in LatAm are moderating, and governments have been taking steps to pursue fiscal consolidation. These factors, coupled with a relatively favourable external environment, are providing policymakers with the opportunity to start relaxing monetary policy.
Colombia's economy remained resilient in July, thanks to strong domestic demand and relatively good external conditions for the country's top exports.
January's retail sales figures, released today, look set to indicate that consumers are keeping the recovery going, amid deteriorating business sentiment and faltering external trade.
The euro area's external surplus dipped at the start of Q4.
Last week's comments by Mr. Draghi--see here-- indicate that the ECB is increasingly confident that core inflation will continue to move slowly towards the target of "below, but close to 2%", despite elevated external risks, and marginally tighter monetary policy.
Yesterday's trade data showed that the Eurozone's external balance continues to improve markedly. The seasonally adjusted trade surplus in the euro area rose to €23.3B in December, a new all-time high, from a revised €21.6B in November.
Colombia is one of the fastest growing economies in LatAm but over the last few quarters the country has been adjusting to the collapse in oil prices, the depreciating currency and rising inflation. But the slowdown, especially on the domestic side of the economy, has been less dramatic than expected, so far. Our main scenario is that the adjustment process to challenging external conditions will continue over the coming quarters.
Yesterday's sole economic report showed that the Eurozone's external surplus recovered ground over the summer, but we don't think the rebound will last long.
Banxico is one of the few central banks in LatAm to have hiked rates in 2016, and we expect it to remain relatively hawkish in the face of external risks.
Brazil's recovery has been steady in recent months, and Q1 likely will mark the end of the recession. The gradual recovery of the industrial and agricultural sectors has been the highlight, thanks to improving external demand, the lagged effect of the more competitive BRL, and the more stable political situation, which has boosted sentiment.
Banxico left Mexico's benchmark interest rate at a record low of 3% last week, maintaining its neutral tone and indicating that the balance of risks has worsened for growth, while the risks for future inflation are unchanged. Policymakers acknowledged the external headwinds to the Mexican economy, but underscored that private consumption has gathered strength thanks to improving employment, low inflation, higher overseas remittances, and better credit conditions.
The Eurozone's external surplus is on track for a record-breaking year in 2016. Data yesterday showed that the current account surplus rose to €28.4B in October, from €27.7B in September. The trade surplus in goods fell, but this drag was offset by a higher services and income surplus, and a lower current transfers deficit.
The Eurozone's external surplus fell further at the end of Q1, and has now fully reversed the jump at the start of the year.
The Eurozone's external surplus remains solid, despite hitting a wall in August. The seasonally adjusted current account surplus fell to €17.7B in August from €25.6B in July, due to a €7B fall in the goods component. A 5.2% month-to-month collapse in German exports -- the biggest fall since 2009 -- was the key driver, but we expect a rebound next month. The 12-month trend in the Eurozone's external surplus continues to edge higher, rising to 3% of GDP up from 2.1% in August last year.
LatAm's economies are gradually rebounding, boosted by easier monetary policy in most countries, falling inflation, and a relatively calm external backdrop.
Banxico's tightening cycle has totalled 400 basis points, lifting rates to 7.0%. Since late 2015, Banxico has followed the Fed closely, but other external factors also have guided many of its decisions.
The external surplus in the EZ economy slipped in July. The seasonally-adjusted current account surplus dropped to €21.0B, from a revised €29.5B in June, hit by an increase in the current transfers deficit, and a falling trade surplus. The recent increase in the transfers deficit partly is due to the migrant deal with Turkey, and we expect it to remain elevated.
The Eurozone's external accounts were extremely volatile at the end of Q4.
The current account surplus in the Eurozone is well on its way to stabilising above 3% of GDP this year. The seasonally adjusted surplus rose to €29.4B in September from a revised €18.7B in August, lifted by a higher trade surplus, thanks to rebounding German exports. The services balance was unchanged at €4.5B in September, while the primary income balance edged higher to €4.8B from €4.0B. The improving external balance has been driven mostly by a surging trade surplus with the U.S. and the U.K., as our first chart shows.
Argentina's economy is firing on all cylinders, thanks to improving fundamentals and a positive external backdrop.
In one line: Struggling, and external conditions point to challenging times ahead.
The Mexican labor market has remained relatively healthy in recent months, despite many external and domestic headwinds. Formal employment has increased by 2.1% year-to-date and by 3½% in the year to July, according to the Mexican Social Security Institute.
Economic activity in Mexico during the past few months has been improving gradually, as external and domestic threats appear to have diminished.
External Factors are Hurting Latam...But Most of the Domestic Economies Remain Sound
The BCB's Copom kept Brazil's Selic rate at 14.25% this week, as expected. The brief accompanying communiqué was very similar to the January statement, saying that after assessing the outlook for growth and inflation, and "the current balance of risks, considering domestic and, mainly, external uncertainties", the Copom decided to keep the Selic rate at a nine-year high, without bias.
Mexico's central bank, Banxico, capitulated to the sharp MXN depreciation yesterday and increased interest rates by 50bp, for the second time this year, in a bid to support the currency. Raising rates to 4.25% was a brave step, as the economic recovery remains sluggish, thanks mostly to external headwinds. The hike demonstrates that policymakers are extremely worried about the decline in the MXN and its lagged effect on inflation.
The manufacturing sector is much more exposed to external forces--the dollar, and global growth--than the rest of the economy. But much of the slowdown in the sector over the past year-and-a-half, we think, can be traced back to the impact of plunging oil prices on capital spending in the sector.
A Fog of Political and External Risks in the EZ...and Recent Economic Data Have Been Soft Too
The EZ Economy has rarely been in better from...but external risks and policy uncertainty loom.
External Conditions Are Helping Latam...But Political Risks Will Constrain The Rebound
The Recovery Gathered Speed in Q4...But External Chaos Has Hit Domestic Markets
Latam's recovery continues...but external threats have increased lately
The Coronavirus Is A New Economic Threat....Bad News For Latam's External-Driven Economies
Yesterday's first estimate of Q1 GDP in Mexico confirmed that growth was resilient at the start of the year, despite the lingering hit to confidence from domestic and external threats.
External demand for the Eurozone's largest economy is going from strength to strength. Seasonally adjusted German exports rose 3.4% month-to-month in December, equivalent to a solid 7.5% increase year-over-year.The revised indices show that the annualised surplus rose to an all-time high of €218B, or 7% of GDP, last year, indicating that the level of external savings remains a solid support for the economy.
Germany's external surplus remained resilient at the start of the year. Data on Friday showed that the seasonally adjusted trade surplus rose marginally to €18.5B in January, from a revised €18.3B in December.
External and domestic shocks in Mexico over the last two years, including the "gasolinazo", NAFTA renegotiation and the presidential election, have put the country's financial metrics under severe stress and pushed inflation to cyclical highs.
Inflation in the Andean economies ended 2019 well within central banks' objectives, despite many domestic and external challenges.
The euro area's external surplus remained resilient toward the end of 2017, in the face of a stronger currency. The seasonally adjusted trade surplus rose to €22.5B in November, from €19.0B in October, lifted primarily by a jump in German exports.
LatAm economies this year have faced a tough external environment of subdued commodity prices, weaker Chinese growth, the rising USD, and the impending Fed lift-off. At the domestic level, lower public spending, low confidence, and economic policy reform have clashed with above-target inflation, which has prevented central bankers from loosening monetary policy in order to mitigate the external and domestic headwinds. In these challenging circumstances, LatAm growth generally continues to disappoint, though performance is mixed.
In yesterday's report we discussed the recent performance of current inflation and inflation expectations in the biggest economies in LatAm, highlighting that risks are tilted to the upside, given the recent FX sell-off and rising political and external risks.
Germany's external balance was virtually stable at the beginning of the second quarter. The seasonally adjusted trade surplus rose marginally to €23.9B in April from a revised €23.7B in March, mainly due to weakness in imports. Demand for goods abroad fell 0.2% month-to-month, which pushed up the surplus despite amid unchanged exports. Imports fell 1.5% year-over-year in April, up slightly from a 2.5% decline in March.
Recent activity data in Mexico have been soft and leading indicators still point to challenging near-term prospects, due mainly to relatively high domestic political risk, stifling interest rates and difficult external conditions.
Germany's nominal external surplus rebounded smartly over the summer, but real net trade looks set to be a drag on Q3 GDP growth, again. The seasonally adjusted trade surplus increased to €21.6B in August from a revised €19.3B in July.
Yesterday's German trade data showed that the external surplus recovered in August, following its poor start to Q3. The seasonally-adjusted trade surplus rose to €22.2B, from €19.4B in July.
Growth in South America disappointed last year, but prospects are gradually improving on the back of rising commodity prices and the global manufacturing rebound. These factors will help to ease the region's external and fiscal vulnerabilities, particularly over the second half of the year. On the domestic front, though, the first quarter has proved challenging for some countries, hit by temporary supply factors such as a mine strikes, floods, and wildfires.
The Eurozone's external surplus rebounded slightly at the start of Q3.
The euro area's record-high external surplus has prompted commentators to suggest that the zone has room to loosen fiscal policy to support growth, or at least relax the deficit reduction rules.
LatAm assets have struggled in recent days as it has become clear that the Fed will hike next week. But we don't expect currencies to collapse, as domestic fundamentals are improving and the broader external outlook is relatively benign.
External demand in France probably weakened in the first quarter. The trade deficit widened sharply to €5.2B in February, from a revised €3.9B in January, pushing the current account deficit to an 18-month high. It is tempting to blame the stronger euro, but that wasn't the whole story.
The Mexican economy maintained its relatively strong momentum in Q2. The first estimate of Q2 GDP, released last week, confirmed that growth was resilient during the first half of this year, despite the confidence hit caused by domestic and external headwinds.
Brazil's external position continue to improve, but we are sticking to our view that further significant gains are unlikely in the second half, given the stronger BRL. For now, though, we still see some momentum, with the unadjusted trade surplus increasing to USD7.2B in June, up from USD4.0B a year earlier. Exports surged 24% year-over-year but imports rose only 3%.
Sterling's depreciation has done little to remedy the U.K.'s dependence on external finance.
A dovish speech by external MPC member Michael Saunders was the primary catalyst for a renewed fall in interest rate expectations last week.
Yesterday's first estimate of full-year 2017 GDP in Mexico indicates that growth was relatively resilient, despite domestic and external threats and the hit from the natural disasters over the second half of the year.
The outlook for Argentina is improving. We expect economic growth to remain quite strong over the next year, despite a relatively soft start to 2017 and increasing external threats in recent weeks. The INDEC index of economic activity--a monthly proxy for GDP--is volatile, rising 1.9% month-to-month in March after a 2.6% drop in February, but the underlying trend is improving.
Today's advance Q3 GDP report for Mexico will show that the economy performed relatively well at the start of the second half, despite external and domestic shocks.
The scars from previous economic crises have not healed fully in the Eurozone, and we think the ECB will extend QE today, by six months to Q3 2017. We expect Mr. Draghi to retain his dovish bias in the opening statement, and to repeat the emphasis on downside risks, due to the weak external environment and political fears.
Tomorrow, Mexico's INEGI will release its inflation report for the second half of May, which is of key importance for Banxico's monetary policy. The Bank, in particular governor Agustin Carstens, has said on many occasions that it will watch external conditions and their impact on consumer prices closely. We expect inflation to edge down to 2.9% year-over-year in May, thanks to a 0.1% increase in the second half.
In one line: Great, but rising external risks suggest that the recovery will stutter.
In one line: Disappointing, and the outlook remains challenging due to high external risks.
In one line: The first q/q fall since 2016 due to an array of domestic and external challenges.
In one line: Soft industrial data, and external conditions for EM economies are becoming increasingly challenging
In one line: Better domestic conditions offset by rising external risks.
In one line: On hold, but challenging external conditions will force BanRep to cut rates in late Q4 or Q1.
With the FOMC decision now just seven days away, the forcefulness of recent Fed speakers has led many analysts to argue that only a spectacularly bad payroll report, or an external shock, can prevent a rate hike next week. External shocks are unpredictable, by definition, and we think the chance of a startlingly terrible employment report is low, though substantial sampling error does occasionally throw the numbers off-track.
BoJ snubs the doves. Japan's unemployment rate downtick was minimal. The weak external backdrop dominates Japan's pre-tax front-loading industrial activity.
In one line: Solid; the EZ's external surplus is now firmly above 3% of GDP.
Inflation pressures remain under control in most LatAm economies, allowing central banks to keep interest rates on hold, despite the challenging external environment.
It's hard to overstate the geopolitical importance of Friday's assassination of Qassim Soleimani, architect of Iran's external military activity for more than 20 years and perhaps the most powerful man in the country, after the Supreme Leader.
The Eurozone's external surplus rebounded further over the summer.
Mexico's economy slowed marginally in Q4, due mainly to the challenging external environment, but the domestic economy remains relatively healthy. Real GDP rose 0.5% quarter-on-quarter in Q4, following a 0.8% solid expansion in Q3. Year-over-year growth dipped to 2.5% from 2.8%.
Economic activity in Mexico during the past few months has been resilient, as external and domestic threats, particularly domestic political risks, appear to have diminished.
Brazil's external accounts were the bright spot last year, once again, but the ne ws will soon take a turn for the worse. The current account deficit fell to just USD24B last year, or 1.3% of GDP, from USD59B in 2015. The improvement was driven by the trade surplus, which rose to USD48B, the highest since 1992, when the comparable data series begins. A 20% plunge in imports, coupled with a mere 3% dip in exports, explain the rising trade surplus.
Brazil's external deficit fell marginally in October, but most of the improvement is now likely behind us. The unadjusted current account deficit dipped to USD3.3B, from USD4.3B in October 2015. The trend is stabilizing, with the 12-month total rolling deficit easing to USD22B--that's 1.2% of GDP--from USD23B in September.
Yesterday's detailed Mexican GDP report confirmed that growth was resilient in Q1, despite external and domestic headwinds. GDP rose 0.7% quarter-on-quarter in Q1, in line with our expectation, but marginally above the first estimate, 0.6%.
Yesterday's detailed Mexican GDP report confirmed that growth was relatively resilient in Q2, despite the lagged effect of external and domestic headwinds.
The Eurozone has come under the spotlight for its growing external surplus, but domestic households have been doing the heavy lifting for GDP growth in this business cycle. During the last four quarters, consumers' spending has boosted year-over-year GDP growth by an average of 1.0 percentage points, in contrast to a 0.4pp drag from net exports.
Financial markets in Brazil and Argentina have been under pressure this week, following negative news, both domestic and external. In Brazil, the Ibovespa index tumbled nearly 1.8% on Tuesday after a Senate Committee rejected the Government's labour reform bill.
The two major central banks in Asia currently have hugely different aims, causing a policy divergence that won't survive the 2018 rise in external yields.
The Colombian economy--the star of the previous economic cycle in LatAm--is now slowing significantly, due mostly to strong external headwinds. Exports plunged by 40% year-over-year in January, down from -29% in December, with all of the main categories contracting in the worst performance since 1980.
Mexico's economy continues to withstand several headwinds, especially the sharp currency depreciation--shown in our first chart--falling commodity prices, and the tough external environment. The country is still one of the economic bright spots in the region, thanks to its resilient domestic demand. June retail sales rose 5.4% year-over-year, well above expectations, and up from 4.1% in May. The underlying trend is positive, averaging 4.8% in the second quarter, well above its 2014 pace.
China's total debt stock is high for a country at its stage of development, relative to GDP, but it is sustainable for country with excess savings. China was never going to be a typical EM, where external debtors can trigger a crisis by demanding payment.
Brazil's Q4 industrial production report, released Wednesday, confirmed that the recovery remained sluggish at the end of last year. December's print alone was relatively strong, though, and the cyclical correction in inventories--on the back of improving demand--lower interest rates, and the better external outlook, all suggest that the industrial economy will do much better this year.
Mexico's National Institute of Statistics--INEGI-- will release preliminary GDP data for Q1 on Friday. We are expecting good news, despite the tough external and domestic environment. According to the economic activity index--a monthly proxy for GDP-- growth gained further momentum in Q1, based on data up to February.
Banxico's Quarterly Inflation Report--QIR--for Q4 2016, published this week, confirmed that the monetary authority is concerned about the slowing pace of economic activity and rising inflation pressures. Banxico noted that signs of a recovery have emerged in external demand, but it also pointed out that the Trump administration might impose policies which would hit FDI flows into Mexico.
The Mexican economy is recovering gradually, despite many external headwinds. This week, the IGAE economic activity index--a monthly proxy for GDP--rose a solid 2.6% year-over-year in August, up from 2.0% in July. In the first half the economy grew on average 2.4%. The report showed increases in all three sectors, most notably agriculture, up 8.2% year-over-year, followed by services, 3.3%, and industrial activities, with a 1.0% gain.
Argentina's economic data released last week confirm that the economy is improving. Our core view, for now, is that the economy will continue to defy rising political uncertainty, both domestic and external.
Brazil's economic prospects continue to deteriorate rapidly, due to a combination of rising political uncertainty, the failure of the new government to advance on reforms, and ongoing external threats.
Economic activity in Mexico during the past few months has been relatively resilient, as external and domestic threats appear to have diminished.
Eurozone investors continue to look to the ECB as the main reason to justify a constructive stance on the equity market. Last week, the central bank all but promised additional easing in March, but the soothing words by Mr. Draghi have, so far, given only a limited lift to equities. Easy monetary policy has partly been offset by external risks, in the form of fears over slow growth in China, and the risk of low oil prices sparking a wave of corporate defaults. But uncertainty over earnings is another story we frequently hear from disappointed equity investors. We continue to think that QE and ZIRP offer powerful support for equity valuations in the Eurozone, but weak earnings are a key missing link in the story.
Mexico's external accounts remain solid, despite adverse global conditions over the past year. The current account decreased to USD9.5B, or 3.2% of GDP, in the first quarter, just down from 3.3% a year earlier. Shortfalls of USD10.3B in the income account and USD4.7B in goods and services--mostly the latter--were again the key driver of the overall deficit.
Andres Abadia authors our Latin American service. Andres is a native of Colombia and has many years' experience covering the global economy, with a particular focus on Latin America. In 2017, he won the Thomson Reuters Starmine Top Forecaster Award for Latam FX. Andres's research covers Brazil, Mexico, Argentina, Chile, Colombia, Peru and Venezuela, focusing on economic, political and financial developments. The countries of Latin America differ substantially in terms of structure, business cycle and politics, and Andres' researchhighlights the impact of these differences on currencies, interest rates and equity markets. He believes that most LatAm economies are heavily influenced by cyclical forces in the U.S. and China, as well as domestic policy shocks and local politics. He keeps a close eye on both external and domestic developments to forecast their effects on LatAm economies, monetary policy, and financial markets. Before starting to work at Pantheon Macroeconomics in 2013, Dr. Abadia was the Head of Research for Arcalia/Bancaja (now Bankia) in Madrid, and formerly Chief Economist for the same institution. Previously, he worked at Ahorro Coporacion Financiera, as an Economist. Andres earned a PhD in Applied Economics, and a Masters Degree in Economics and International Business Administration from Universidad Autónoma de Madrid, and a BSc in Economics from the Universidad Externado de Colombia.
With the Mexican Elections on July 1st, our Chief Latam Economist Andres Abadia has received many questions about the possible outcomes and how this will affect the Mexican economy going forward.
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Claus Vistesen has several years' experience in the independent macro research space, as a freelancer, consultant and, latterly, as Head of Research of Variant Perception, Inc. He holds Master's degrees in economics and finance from the Copenhagen Business School and the University of Hull.
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Miguel Chanco helps to produce Pantheon's Asia service, having covered several parts of the region for nearly ten years. He was most recently the Lead Analyst for ASEAN at the Economist Intelligence Unit. Prior to that role, Miguel focused on India and frontier markets in South Asia for Capital Economics and BMI Research, Fitch Group.
Freya Beamish produces the Asia service at Pantheon. She has several years of experience in covering the global economy, with a particular focus on China, Japan and Korea. Previously, she worked at Lombard Street Research (now TS Lombard), where she delivered research on Asia and the Global economy for over five years, latterly as the manager of the Macroeconomics group.
Samuel Tombs has more than a decade of experience covering the U.K. economy for investors. At Pantheon, Samuel's research is rigorous, free of dogma and jargon, and unafraid to challenge consensus views. His work focuses on what matters to professional investors: The links between the real economy, monetary policy and asset prices. He has a strong track record of getting the big calls right. The Sunday Times ranked Samuel as the most accurate forecaster of the U.K. economy in both 2014 and 2018. In addition, Bloomberg consistently has ranked Samuel as one of the top three U.K. forecasters, out of pool of 35 economists, throughout 2018 and 2019. His in-depth knowledge of market-moving data and his forensic forecasting approach explain why he consistently beats the consensus. Samuel's work on Brexit goes beyond simply reporting developments and is always analytical and unbiased, enabling investors to see through the noise of the daily headlines. While his analysis points to a particular path that politicians will take, he acknowledges the inherent uncertainty and draws out the economic and financial market implications of all plausible Brexit scenarios. Samuel holds an MSc in Economics from Birkbeck College, University of London and an undergraduate degree in History and Economics from the University of Oxford. Prior to joining Pantheon in 2015, he was Senior U.K. Economist at Capital Economics. In 2011, Samuel won the Society of Business Economists' prestigious Rybczynski Prize for an article on quantitative easing in the UK. He is based in London but frequently visits our other offices. Recent key calls include: 2018 - Correctly forecast that GDP growth would slow and inflation would undershoot the MPC's initial forecast, prompting the Committee to shock investors and almost other economists by waiting until August to raise Bank Rate, rather than pressing ahead in May. 2017 - Argued that the MPC was wrong to expect CPI inflation to stay below 3% following sterling's depreciation. He also highlighted that economic indicators pointed to the Conservatives losing their outright majority in the snap general election.
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