Brazil Economic Weekly

Transcription

1 Macroeconomic Research Department Macroeconomic Research Department Brazil Economic Weekly September 18 th 2015 Recent consumer credit performance reflects more cautious consumer behavior Ellen Regina Steter Responding to the more adverse conditions of the Brazilian economy, with the inflationary pressures concentrated earlier this year combined with rising unemployment and slowing wage gains, consumer surveys continue to show confidence rates at very low levels. This more adverse scenario has impacted the demand for lines of consumer credit, especially for durable goods. A more conservative household posture, with a lower propensity to consume, is being reflected in the credit sector. Unlike in previous years, the growth of the consumer credit portfolio has basically occurred along the lines related to everyday spending, not the acquisition of durable goods. Over the last twelve months, the modes of financing that contributed most to expansion in the credit sector were payroll loans and credit cards used for cash purchases, which increased 77.4% and 28.4% over July In other words, this ran counter to the previous trend, given that it is not the durable goods lines that are sustaining household credit levels. We believe that the trend observed over the first seven months of 2015 in the credit portfolio should continue for the rest of the year and into Following the slowdown in economic activity and the deterioration of the labor market, we believe that families will remain cautious, adjusting their budgets and giving preference, where possible, to maintaining their consumption of services at the expense of goods. In other words, the demand for consumer financing, particularly for durable goods, should remain moderate. Thus, we estimate growth of 3.2% for the portfolio of general consumer credit from the financial system against 5.5% posted in Note that the credit portfolio of general funds does not include real estate financing, which is considered a targeted line and therefore is not part of the above estimate. In this case, even though it is also experiencing a slowdown, the housing loan portfolio will still present the highest household credit growth rate of 15.5% this year. BRAZIL ECONOMIC WEEKLY Accommodation of Latin American economies in recent months will facilitate the beginning of a normalization of monetary conditions in the region Felipe Wajskop França The major Latin American central banks have been facing a difficult dilemma since the beginning of the year. On the one hand, rising inflationary pressures and currency devaluation demand a more cautious stance by monetary authorities. On the other, slowing economic growth suggests the permanence of a lower level of interest rates for an extended period. In recent months, however, the balance of risks has swung towards the beginning of a normalization of monetary conditions in the region - inflation (and inflation expectations) have risen again, while economic activity has settled. Indeed, Peru s central bank raised interest rates at its last meeting, while their peers in Chile, Mexico and Colombia have become increasingly inclined to follow suit. Therefore, monetary policy bias in the region has intensified toward increasing interest rates, which should lead most central banks to monitor the moves of Peru s central bank until the end of the year. Along these lines, the slight improvement in economic activity in these countries in recent months will allow monetary authorities to direct their efforts mainly towards combating inflation. Even the uncertainties in the international outlook, especially with respect to the performance of the Chinese economy, point towards rising interest rates, given that they can still put more pressure on the exchange rate (and consequently on inflation). 1

2 Recent consumer credit performance reflects more cautious consumer behavior Ellen Regina Steter Responding to the more adverse conditions of the Brazilian economy, with the inflationary pressures concentrated earlier this year combined with rising unemployment and slowing wage gains, consumer surveys continue to show confidence rates at very low levels. This more adverse scenario has impacted the demand for lines of consumer credit, especially for durable goods. The Getulio Vargas Foundation (FGV) conducts a monthly survey based on a sample of over 2,000 households in seven Brazilian cities: Belo Horizonte, Brasília, Porto Alegre, Recife, Salvador, Rio de Janeiro and São Paulo. The latest data released in August revealed that consumers remain pessimistic about the current situation and the coming six months. The survey s methodology involves the release of an index, where numbers above 100 indicate optimism and below 100 indicate pessimism. In August, the series reached its lowest level since it started in 2005 (after a methodological revision) Consumer Confidence Current Situation Neutral Expectations 114,3 124,4 124,2 145,9 124,9 147,8 127,8 113,0 Consumer Confidence Index and its components (seasonally-adjusted) September 2005 = ,9 93,1 103,5 104,1 85, Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 Feb-09 Aug-09 Feb-10 Aug-10 Feb-11 Aug-11 Feb-12 Aug-12 Feb-13 Aug-13 Feb-14 Aug-14 77,7 Feb-15 Aug-15 80,6 71,4 Source: FGV This decline in consumer confidence connected to changing monetary conditions and the increasing prices of various goods due to the resumption of taxes (such as the IPI), in turn, has direct implications on the willingness of households to commit more of their income to the purchase of goods and services. Within this context, the same FGV survey has a sub-item on the intention of consumers to buy durable goods in the next six months. The trajectory of this indicator has shown a clear drop since mid Domestic Outlook ,5 101,8 92,4 89,7 81,4 84,2 76,2 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Aug-08 71,4 Feb-09 85,7 80,0 77,6 Aug-09 Feb-10 Aug-10 88,3 82,0 Feb-11 91,9 91,3 87,6 84,8 78,9 Aug-11 Feb-12 Aug-12 Feb-13 89,0 84,1 83,2 72,8 Aug-13 Feb-14 Aug-14 Feb-15 72,2 Aug-15 68,6 Intention to purchase durable goods in the next six months (seasonally-adjusted) Source: FGV 2

3 Thus, the slowdown in consumer credit concessions in the National Financial System, apparent in the figures published monthly by the Central Bank of Brazil, has reflected this reduction in consumer intentions and, naturally, the lower demand for lines of credit. The general consumer credit portfolio grew by 4.7% in the last twelve months ended in July. This is the same rate of expansion observed since the middle of last year. Despite the maintenance of the portfolio growth rate, it is important to note that the composition of the lines is changing. A more conservative household posture, with a lower propensity to consume, is being reflected in the credit sector. Unlike in previous years, the growth of the consumer credit portfolio has basically occurred along the lines related to everyday spending, not the acquisition of durable goods. Over the last twelve months, the modes of financing that contributed most to expansion in the credit sector were: payroll loans and credit cards used for cash purchases, which increased 77.4% and 28.4% over July In other words, this ran counter to the previous trend, given that it is not the durable goods lines that are sustaining household credit levels. Payroll loans Credit card for cash purchases Personal loan (ex-consigned) Other Revolving credit card Credit renegotiation 14,4% 9,90% 9,80% 5,58% 28,37% 77,37% Contribution of the general consumer credit lines to the growth of the portfolio over twelve months Jul 2015 Installment credit card 2,27% Overdraft 0,7% Check cashing -0,45% Consumer credit for other goods -1,74% Leasing -6,37% Consumer credit for vehicles -39,87% -50,0% -30,0% -10,0% 10,0% 30,0% 50,0% 70,0% 90,0% Source: BCB Automobile financing has experienced the most significant declines among all of the modes of financing. Over the last twelve months, the vehicle purchase portfolio (consumer credit) and leasing portfolio showed a decrease of 8.7%. The performance of automobile and light truck sales also reflects the low intention of consumers to purchase durable goods. Vehicle sales from August 2014 to July of this year grew approximately 1.5% over the previous twelve months, according to Fenabrave figures. Though this sales growth seems counterintuitive given the credit performance, it is worth mentioning that the main driver of growth for the automobile financing portfolio are the sales of new cars, which in this case are contracting approximately 13% on the same basis of comparison. Therefore, even though it minimizes the impact of the slowdown in vehicle sales, the 6.7% growth in the sale of used cars has not been enough to boost automobile financing, given that the average ticket financed is lower. Domestic Outlook 60,0% 53,0% 50,0% 40,0% 30,8% 30,0% 20,0% 10,0% 6,2% 0,0% -10,0% -20,0% 0,0% -8,1% 21,7% 6,7% -1,9% 11,3% -4,5% Used automobile sales Credit New automobile sales 6,5% 3,6% 6,7% -8,7% -11,0% -13,2% Mar-08 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Sep-09 Nov-09 Jan-10 Mar-10 May-10 Jul-10 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Mar-13 May-13 Jul-13 Sep-13 Nov-13 Jan-14 Mar-14 May-14 Jul-14 Sep-14 Nov-14 Jan-15 Mar-15 May-15 Jul-15 Interannual growth of vehicle financing (consumer credit and leasing) and the sale of automobiles and light trucks (12-month accumulated) Source: BCB, Fenabrave 3

4 Rising consumer demand for everyday, lower valueadded items can also be seen in the data from the IBGE s Monthly Survey of Trade (PMC). Even though the slowdown is widespread across sectors, the largest decrease has been seen in durable goods (cars, motorcycles, parts and equipment) and semi-durable goods (furniture and appliances). It is important to remember that in the case of furniture and appliances, the reintroduction of the IPI accentuated the downturn. Vehicles, motorcycles, parts and equipment Furniture and appliances Books, newspapers, magazines and stationary Fabric, clothing and footwear -13,3-12,8-9,2-8,1 Volume of retail sales interannual growth, in % Construction materials -7,1 Extended retail trade Equipment and materials for offices, IT and communications Fuel and lubricants -6,8-5,2-3,6 Restricted PMC -3,5 Megamarkets, supermarkets, food and beverage products, and tobacco -2,1 Supermarkets and megamarkets -2,0 Other personal and domestic use items 0,3 Pharmaceutical, medical, orthopedic articles and perfumery 1,6-15,0-12,0-9,0-6,0-3,0 0,0 3,0 Source: IBGE/PMC In fact, the debt data show a deleveraging of household consumer credit. In June, the percentage of annual income required to liquidate the inventory of consumer credit in the financial system (an indicator known as indebtedness ) reached 45.8%, remaining essentially stable in relation to the same period last year. It is important to note, in the following chart, that when we excluded housing loans from the indebtedness calculation, we have a declining trajectory of consumer credit, which began in 2013 and has intensified in recent months. This behavior was also seen in the income commitment trajectory (the percentage of monthly income required to settle the credit amount), which after a peak of 22.9% at the end of 2011 is now 21.8%, even including housing loans. 48,0 44,0 40,0 36,0 32,0 28,0 25,9 Indebtedness (including housing) Indebtedness (ex-housing) 43,6 39,3 41,8 33,1 32,4 30,7 31,4 31,3 28,2 28,8 45,9 45,1 43,6 30,6 29,1 45,8 27,14 Indebtedness of households with credit from the National Financial System 24,0 20,0 Dec-07 Feb-08 Apr-08 Jun-08 Aug-08 Oct-08 Dec-08 Feb-09 Apr-09 Jun-09 Aug-09 Oct-09 Dec-09 Feb-10 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Feb-13 Apr-13 Jun-13 Aug-13 Oct-13 Dec-13 Feb-14 Apr-14 Jun-14 Aug-14 Oct-14 Dec-14 Feb-15 Apr-15 Jun-15 Domestic Outlook 12-month variation of debt among households with credit from the national financial system (in percentage points) Source: BCB 5,5 4,9 4,5 4,3 4,2 3,6 3,5 3,4 2,5 1,5 0,5 0,1-0,5-1,5-2,5 2,4 1,9 0,6 0,6 Housing Total Consumption 2,7 2,4 2,5 2,3 1,1 0,3 0,6-1,4-1,6 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13 Sep-13 Dec-13 Mar-14 Jun-14 Sep-14 Dec-14 Mar-15 Jun-15 1,8-0,1-1,9 4

5 We believe that the trend observed over the first seven months of 2015 in the credit portfolio should continue for the rest of the year and into Following the slowdown in economic activity and the deterioration of the labor market, we believe that families will remain cautious, adjusting their budgets and giving preference, where possible, to maintaining their consumption of services at the expense of goods. In other words, the demand for consumer financing, particularly for durable goods, should remain moderate. Thus, we estimate growth of 3.2% for the portfolio of general consumer credit from the financial system against 5.5% posted in Note that the credit portfolio of general funds does not include real estate financing, which is considered a targeted line and therefore is not part of the above estimate. In this case, even though it is also experiencing a slowdown, the housing loan portfolio will still present the highest household credit growth rate of 15.5% this year. Domestic Outlook 5

6 Accommodation of Latin American economies in recent months will facilitate the beginning of a normalization of monetary conditions in the region Felipe Wajskop França The major Latin American central banks have been facing a difficult dilemma since the beginning of the year. On the one hand, rising inflationary pressures and currency devaluation demand a more cautious stance by monetary authorities. On the other, slowing economic growth suggests the permanence of a lower level of interest rates for a extended period. In recent months, however, the balance of risks has swung towards the beginning of a normalization of monetary conditions in the region - inflation (and inflation expectations) have risen again, while economic activity has settled. Indeed, Peru s central bank raised interest rates at its last meeting, while their peers in Chile, Mexico and Colombia have become increasingly inclined to follow suit. For several months, consumer inflation in Latin America has remained above the targets set for central banks in the region. However, more recently, this behavior has intensified. In August, the consumer price index in Chile rose 5.0% over the same period 2014, exceeding the target ceiling of 4.0%. The same was seen in Colombia and Peru, where prices rose 4.7% and 4.0%, respectively. The exception continues to be Mexico, where inflation remains below the central target of 3.0% (last month it reached 2.6%). While some of this behavior is due, in general, to temporary swings in food prices and the exchange rate, its impact on other prices and expectations in particular has been more persistent. 5,7% 4,7% Target: 3,0% (+/- 1 p.p) Target: 3,0% (+/- 1 p.p) 5,00% 4,74% Target: 2,0% (+/- 1 p.p) 4,04% 12-month accumulated inflation and inflation targets (Aug/15) 3,7% Target: 3,0% (+/- 1 p.p) 2,7% 2,59% 1,7% 0,7% Chile Colombia Peru Mexico Source: Bloomberg Global Outlook At the same time, the slowdown in economic activity in these countries has been softening in recent months. In Colombia, GDP once again increased in the second quarter, after contracting for more than a year. The 3.0% growth over the same period in 2014 followed an increase of 2.8% in the first three months of the year and an increase of 3.4% in the last quarter of The Peruvian economy also showed interannual growth of 3.0% in the most recent quarter, after expanding 1.8% from January to March and 1.0% from September to December Chile and Mexico registered slight decelerations, after two quarters in recovery. In the case of the former, the 1.9% increase in GDP followed increases of 1.8% and 2.5% in the fourth quarter of last year and in the first three months of this year, respectively. Mexico, in turn, expanded 2.2%, following growth of 2.6% in the previous two quarters. 6

7 Q Q Q Q Q Chile 2,1% 1,0% 1,8% 2,5% 1,9% Colombia 4,2% 4,2% 3,4% 2,8% 3,0% Mexico 1,7% 2,2% 2,6% 2,6% 2,2% Peru 1,8% 1,8% 1,0% 1,8% 3,0% GDP change over the same period of last year (%) Source: Bloomberg More important is the behavior in the margins of these economies. In Chile, the monthly indicator of activity prepared by the country s central bank rose 0.8% in June and 0.1% in July, after accumulating 0.2% growth in the previous five months. In Mexico, industrial production, which has weighed GDP down in recent quarters, accumulated growth of 0.4% in June and July, following a decrease of 0.2% from January to May. The same trend can be seen in Colombia, where industry, after accumulating a decrease of 2.3% in the first five months of the year compared to the same period last year, increased by 0.3% between July this year and the same month last year. Finally, in Peru, on the same basis of comparison, economic activity jumped from an increase of 2.1% from January to May to 3.3% in July. Thus, given the softening of the slowdown in Latin American economies and of the persistence of inflationary pressures, central banks in the region have become more hawkish. Peru s central bank was the first to raise interest rates at its most recent monetary policy meeting. It justified the increase of 0.25 percentage points over the base rate based on the worsening of inflation expectations and the gradual improvement in economic activity. However, it also stated that this is not the start of a monetary tightening cycle, and that it will make new adjustments to interest rates if deemed necessary. In Colombia, the directors of the country s central bank have diverged on the need to initiate a process of increasing interest rates. Those who favor an increase argue that the pass through of the exchange rate has overtaken the impact of the decline in GDP on inflation. Meanwhile in Chile, in its latest statement, the country s central bank argued that the convergence of inflation with the target will require the withdrawal of monetary stimulus in the short term. Finally, Mexico s central bank is expected to accompany the start of monetary normalization in the United States, even though inflation in the country remains at a very comfortable level. 5,0% 4,50% Base interest rate (%) 4,0% 3,50% 3,0% 3,00% 3,00% 2,0% 1,0% Colombia Peru Mexico Chile Source: Bloomberg Global Outlook Therefore, monetary policy in the region has intensified in the direction of rising interest rates, which should lead most central banks to follow the moves by Peru s central bank until the end of the year. Along these lines, the slight improvement in economic activity in these countries in recent months will allow monetary authorities to direct their efforts mainly towards combating inflation. Even the uncertainties in the international outlook, especially with respect to the performance of the Chinese economy, point towards rising interest rates, given that they can still put more pressure on the exchange rate (and consequently on inflation). 7

8 Stance of Latin American monetary policy Base rate Inflation Target Domestic Scenario International Scenario Bias Chile 3,00% 5,00% 3,0% (+/- 1) Convergence of inflation with the target will require withdrawal of monetary stimulus in the short term. Growing concern about China and Brazil. Colombia 4,50% 4,74% 3,0% (+/- 1) The pass through of the exchange rate has overtaken the impact on inflation of the decline in GDP. Some members advocate an increase of 0.25 percentage points Higher risk concentrated in falling oil prices and monetary normalization in the United States. Mexico 3,00% 2,60% 3,0% (+/- 1) Currency depreciation led Banxico to intensify intervention in the exchange rate. Main concern is normalization in the US: Banxico expected to follow the FED. Peru 3,50% 4,04% 2,0% (+/- 1) Worsening of inflation expectations led BC to raise interest rates, but this does not signal the beginning of a tightening cycle. Mixed signals about the global recovery and the high volatility of financial assets. Source: Bloomberg Global Outlook 8

9 Bradesco Macroeconomic Forecast * 2015* 2016* DOMESTIC ACTIVITY, INFLATION AND INTEREST RATES GDP (%) Agriculture (%) Industry (%) Services (%) Private consumption (%) Government consumption (%) Investment (%) Exports of goods and services (%) Imports of goods and services (%) GDP (R$ billion - current prices) 2,409 2,718 3,107 3,328 3,886 4,374 4,713 5,157 5,521 5,952 6,311 GDP (US$ billion) 1,107 1,395 1,693 1,666 2,208 2,612 2,411 2,390 2,346 1,829 1,714 Population (million) Per Capita GDP (US$ - current prices) 5,865 7,281 8,716 8,469 11,083 13,232 12,105 11,889 11,571 8,948, 8,319, Industrial Production - IBGE (%) Unemployment Rate - IBGE (%) Retail Sales - (%) CPI - IPCA - IBGE (%) CPI - FIPE (%) WPI - IGP-M - FGV (%) Nominal Interest Rates - Selic target (end of period - %) Nominal Interest Rates - Selic target (12-month - %) ,82 10,81 10,81 Real Interest Rates - Selic (12-month - %) ,25 4,54 4,54 EXTERNAL ACCOUNTS AND FX Trade Balance (US$ billion) Exports (US$ billion) Imports (US$ billion) Trade flow (exports + imports) (% of GDP) Deficit of Services and Income (US$ billion) Current Account Deficit (US$ billions) Current Account Deficit (% of GDP) Foreign Direct Investment (US$ billions) FX - end of period (R$ / US$) FX - yearly average (R$ / US$) Nominal FX devaluation (YoY - %) Nominal FX devaluation (average - %) International Reserves (US$ billion) Total Medium and Long term External Debt (US$ billion) FISCAL ACCOUNTS Primary Surplus (R$ billions) Primary Surplus (% of GDP) Public Sector Nominal Balance (% of GDP) Gross Public Debt (domestic and external) (R$ billion) 1,336 1,542 1,740 1,973 2,011 2,243 2,583 2,748 3,252 3,961 4,490 Gross Public Debt (domestic and external) (% of GDP) Global Outlook As of September 18 th (*) Forecast. na = not available. Source: Official figures Production and forecasts(*): BRADESCO 9

10 Team Octavio de Barros - Macroeconomic Research Director Marcelo Cirne de Toledo Global economics: Brazil: Brazilian sectors: Fabiana D Atri / Felipe Wajskop França / Thomas Henrique Schreurs Pires Igor Velecico / Andréa Bastos Damico / Ellen Regina Steter / Myriã Tatiany Neves Bast / Ariana Stephanie Zerbinatti Regina Helena Couto Silva / Priscila Pacheco Trigo / Leandro de Oliveira Almeida Proprietary survey: Fernando Freitas / Leandro Câmara Negrão / Ana Maria Bonomi Barufi Internships: Davi Sacomani Beganskas / Henrique Neves Plens / Mizael Silva Alves / Gabriel Marcondes dos Santos / Wesley Paixão Bachiega / Carlos Henrique Gomes de Brito Team - BRADESCO does not accept responsibility for any actions/decisions that may be taken based on the information provided in its publications and projections. All the data and opinions contained in these information bulletins is carefully checked and drawn up by fully qualified professionals, but it should not be used, under any hypothesis, as the basis, support, guidance or norm for any document, valuations, judgments or decision taking, whether of a formal or informal nature. Therefore, we emphasize that all the consequences and responsibility for using any data or analysis contained in this publication is assumed exclusively by the user, exempting BRADESCO from all responsibility for any actions resulting from the usage of this material. We all point out that access to this information implies acceptance in full of this term of responsibility and usage. The reproduction of the content in this report (partially or in full) is strictly forbidden except if authorized by BRADESCO or if the sources (the name of the authors, publication and BRADESCO) are strictly mentioned. 10