Halister News

(Bloomberg) -- Recently deteriorated political environment brought volatility to asset prices and increased uncertainties on the timing and pace of Brazil GDP recovery, Santander Economist Mauricio Molan writes in report.

• To back his view that demand drivers don’t warrant such pessimist, Molan cites four important drivers for consumption that he says are not receiving adequate attention from market analysts:
  • Inertial benefit of the recent expansion in real income
  • Impact of the unfreezing of a portion of workers’ fund known as FGTS, a decision that "could represent a non-negligible stimulus for household income in 2Q17”
  • Lower debt service due to the monetary policy easing cycle, with benefits to household disposable income in 2017 and 2018
  • Likelihood of the savings rate declining by 1ppt from already exaggerated levels, even amid political uncertainty
    • "It would require a deep plunge in consumer confidence (to mid-2016 levels) to prevent the savings rate from declining from its very high levels in the coming quarters,” what’s not expected
• Conservative analysis show that consumption could increase as much as 0.9% in 2017 according to Santander’s set of hypotheses
  • “Therefore, we see room for our projection of +0.3% for consumption growth this year to absorb a negative shock from a deterioration of consumer confidence – as long as it does not collapse towards the historical lows seen in mid-2016”

To contact the reporter on this story: Leonardo Lara in Sao Paulo at llara1@bloomberg.net To contact the editors responsible for this story: Daniela Milanese at dmilanese@bloomberg.net Giulia Camillo