LatAm - Focus in Brazil growth outlook

In terms of data, the main release next week in LatAm will be Brazil GDP on Friday, which is expected to have declined 0.5% q/q sa in Q1. There is clear at this point that growth is fairly weak in Brazil during this first half of the year - the monthly GDP proxy for the first quarter had a total contraction of -0.81%. 

All the high-frequency data also had a contraction: from the supply side, industrial production contracted 2.4% q/q sa in Q1; meanwhile, services income decreased 5.2%, compared with Q1 14. On the demand side, retail sales dropped 4.0% q/q sa in Q1, while real fiscal expenditures were 3.1% lower. 

The monthly proxy for fixed-asset investments, calculated taking into consideration the production, exports and imports of capital goods and inputs for the construction sector, is 2.8% q/q sa lower in Q1 15. 

More worrisome, a turning point in Brazil's growth prospects is still far away. The labor market continues to weaken, with the unemployment rate rising to 6.4% in April, from 4.9% a year ago, and real wages having decreased 2.9% y/y, suggesting little support for household consumption. 

Business confidence, according to the May 'flash' index from FGV, hit the lowest point of the historical series initiated in 2005, posing further downsides to the investment outlook. 

On top of that, exits from investments in the construction and oil sector continue to be announced, the effects of Operation Car Wash continue to reverberate, and household disposable income continues to decline.