GDP and service data overview in Brazil, Fomc minutes in the US: what to watch this week

Sao Paulo – The next few days will be a short week due to the October 12 holiday, which will close P3 on Tuesday; However, it will contain key indicators for the Brazilian economy.

The Brazilian Institute of Geography and Statistics (IBGE) will release its services figures for August on Thursday (14), following weak data from industry and retail sales last week.

The next day (15), the central bank issues a monthly preview call for GDP, and August or IBC-Br.

We expect the service sector to increase by 0.6% compared to the previous month, with a 7.6% increase on a monthly basis in the components of services provided to households. For BC’s economic activity index, we expect a decline of 0.3% over the previous month. On the fringes, the normalization of the service sector is the only impetus for Brazil’s growth, “Idach pointed out.

Although more high compared to the second quarter, Prodesco points out that New Bear surprises can confirm a weaker third-quarter reading than expected.

On the inflation side, October IGP-10 will be released on Friday. Itaú plans are down 0.27% month-on-year, taking the annual rate to 22.59% (from 26.84% in September). “The main factor is still some relief in iron ore inflation and agricultural prices, mainly driven by corn, soybeans and derivatives. On the other hand, consumer prices should remain under pressure, mainly due to higher electricity and fuel prices,” Itaú points out.

On the political front, economists point out that Tuesday’s national holiday should slow down activity in Brasilia this week. However, federal deputy Hugo Motta (Republican-PP) filed his fifth opinion. Proposed Amendment to the Constitution (PEC 23/2021), Discussions on this front will be in focus.

In addition, discussions on tax reform in the Senate should be closely monitored, Itaú points out, hoping that Congress will continue discussions on plans aimed at reducing fuel prices. In particular, regional ICMS tax cuts on fuel are being considered in the House of Representatives.

Overseas, the focus will be on the release of September inflation data on Wednesday in the US and China.

“Consumer inflation in the United States should be above 5% over the past 12 months, while the pace of price improvement in the Chinese economy is high,” Brodesco pointed out. Also in the US, retail sales data for September will be released on Thursday.

Prior to that, the minutes of the Fomc (Federal Open Market Committee) September meeting will be released on Wednesday.

We hope the minutes show that the authorities are ready to gradually reduce the bond buying incentives (so-called tapping) in November. Inflation debates need to continue to focus on the reverse risks because inflation forecasts are high, ”Credit points out.

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