The Week Ahead: All Eyes On Manufacturing As 2013 Draws To A Close


Out of all the data releases that we watched for over the previous week, Brazil's disappointing budget numbers for November stand out from the rest, as they serve as a stark reminder of the country's deteriorating fiscal credentials. Already facing the prospect of a ratings downgrade, the recording of a monthly nominal budget deficit is likely to further rattle market sentiment, as consensus expectations were for a sizeable surplus in November. Indeed, Brazil's nominal budget balance recorded a BRL0.2bn deficit, when Bloomberg survey estimates pointed to a BRL12.1bn surplus. Faced with notable macroeconomic challenges and what is likely to be a far more contested election than initially anticipated, we see little to suggest a turning point in fiscal policy and therefore, barring a sharp increase in revenues, believe that fiscal deterioration in Brazil is likely to persist in 2014.

In the week ahead, we will be watching manufacturing data in the region. Brazil, Chile and Mexico will publish manufacturing data, which in the case of the former will likely confirm the trend of a disappointing manufacturing sector performance, in contrast to what has been a robust year for the services sector in Brazil. Meanwhile, we await further evidence that Mexico's manufacturing sector is staging a nascent recovery, which would reaffirm our positive outlook on the economy as a whole.

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