Halister News

(Bloomberg) -- While output released earlier today adds to signs of relief amid the recession, inflation continues to be decisive for central bank decisions and may lead to rate cut in second half, Newton Rosa, chief economist at brokerage SulAmerica Investimentos, says in a phone interview.

• April industrial production unexpectedly rose 0.1% vs median est. of -0.9% (prior 1.4%); Rosa forecast was -0.4%
  • IP was second above-est. activity index in a row after yday 1Q GDP that showed recession not as deep as expected
  • “This is another signal that the economy is close to the end of recession”, Rosa says
  • Recent numbers confirm positive trend priorly showed by confidence indexes due to expectations of political shift; weak BRL also has boosted trade balance
  • Rosa reviewed forecast for 2016 accumulated GDP to -3.5% after yday data from -3.8%
  • GDP q/q to continue to be negative in 2Q, at -0.47%, and may gradually recovery to +0.05% in 3Q and +0.23% in 4Q
  • Retails sales may continue to be weak due to high unemployment
• Gradual recover unlikely to prevent BCB from cutting rates should inflation keep slowing, Rosa says
  • Cuts may start in 2H if inflation in June-July shows slowing results as expected; these numbers are crucial as mark of a seasonally positive period for inflation in Brazil