presented by: macroeconomic scorecard: the americas march 2013 economist doug hermanson

Presented by:

MACROECONOMIC SCORECARD: THE AMERICAS

March 2013

Economist

Doug Hermanson

© Copyright 2013 Kantar Retail

█ = IMPROVING █ = MIXED █ = WORSENING21

Current Retail Conditions

2

Consumer spending challenged by flagging confidence

Summary of Macro Factors Affecting Retail*Q4 2012 or Latest Available Month*

* GDP, Investment and Consumer Spending are quarterly through fourth quarter of 2012; Remaining indicators are monthly through January, February or March 2013

• Brazil’s growth pickup threatened by inflation, weak investment

• Mexico’s strong retail growth is trending weaker

• Canada slowed by weak exports, confidence; helped by low inflation

• U.S. is holding up

Country

GDP, Annualized Growth Rate*Residential & Business Investment*Consumer Spending*Retail Sales Consumer ConfidenceCPI Headline IndexCPI Food IndexCPI Core Index

The Americas

Brazil Canada Mexico United StatesIndicators

Source: Statistics Canada, Mexico (INEGI), Brazilian Institute of Geography and Statistics, U.S. Department of Commerce and Kantar Retail


The Macro Outlook for Retailing in the Americas

3

Slow growth trend shaped by inflation, U.S. uncertainty

Source: Kantar Retail

Short Term (6–12 months)

Long Term (2–5 years)

BrazilEconomy constrained by price pressures, gov’t fiscal/monetary policies

Long-term growth will hinge on ability to keep price pressures in check

Canada

Weakness amid retreating housing market, elevated debt levels, weak exports

Extent of stronger growth depends on avoiding housing/debt bubble

Mexico

Growth slowed by U.S. impact, inflation concerns. But outpacing region’s other economies

Growth prospects relatively strong as rising costs cause U.S. firms to shift trade closer to home

United States

Weakness/threats offset by persisting gains in housing, investment, hiring

Growth kept modest by constraints on income growth, price pressures

Net Outlook

Extent of region’s slower growth depends on impact of inflation in Mexico/ Brazil, and U.S. prospects

Steady-to-strong growth outlook led by commodity markets. Dampened by inflation & U.S. gov’t. cuts

• As the region’s major trade partner, the U.S. will shape the outlook

• Depends on gov’t tax/spend issues

• Canada adds to the risks with its own housing, debt issues

• Brazil, Mexico 2013 prospects challenged by trade outlook, price pressures; but potential still strong in long-term


Summary Conclusions and Implications

4

• Short vs. Long Term. Expect retail demand to remain on a modest and uneven path in the short term. When global growth shifts into a higher gear will be determined most by the euro debt crisis and emerging markets, likely in 2014 or beyond.

• Prices/Costs. Plan on global cost pressures that remain relatively modest for most markets in 2013 as a result of moderate global demand growth in the short term.

• The Americas. Plan for slower or modest growth in Mexico, Canada and Brazil in the short term.

• Canada and Mexico facing modest/weak export demand from U.S.

• Brazil’s price pressures will be drag and present big downside risks

• Canada also is grappling with frothy housing and debt markets

• United States. Expect U.S. retail sales growth to keep a respectable pace, but a notch below last year.


The Americas: GDP Trends Mixed in Q4

5

• Brazil’s Q4 gain was mixed; weak investment still a challenge

• Mexico likely to let up some, but still outpace others

• Softness in Canada

• Underlying U.S. growth trends stronger than suggested in Q4


Growth picks up in Brazil, Mexico; weakens in U.S., Canada The Americas: Inflation-Adjusted GDP

Qtr-to-Qtr Growth, Seasonally-Adjusted Annualized Rate

1.3% 1.3%

3.1%

1.9%

3.1%

1.5% 1.5%0.7%0.4%

2.2%3.1%

0.6%

United States Brazil Mexico Canada

2012.2 2012.3 2012.4


-1%

1%

3%

5%

7%

9%

11%

13%

15%

Mar-11 Mar-12

The Americas: Big Growth Range for Retail Sales

6

• Brazil and Mexico’s retail sales letting up from very strong pace

• U.S. holding at a steady pace is encouraging given uncertainty

• Canada dragged weaker by homegoods channels

The Americas: Nominal Retail SalesYear-to-Year Percent Change**; Not Adjusted for Inflation*

Brazil, Mexico letting up; growth weak in Canada

United States

Brazil

Canada

Mexico

•Through January, except the United States is through February**Growth is a three-month moving average



The Americas: Price Inflation Trends Diverge

7

• Brazilian inflation signals need to slow or change economic policy

• Mexico’s price pressures have tailed off, but may be picking back up

• This contrasts with modest inflation in Canada, United States—despite recent uptick

The Americas: Consumer Price InflationYear-to-Year Percent Change, Through February

Inflation rising at a dangerous pace in Brazil

United States

Brazil

Canada

Mexico

-1%

1%

3%

5%

7%

9%

11%

13%

15%

Mar-11 Mar-12



The Americas: Core Price Trends

8

• Brazil’s core inflation trend is less alarming, but still elevated

• Mexico’s inflation may be letting up in terms of core prices excluding food, fuel

• U.S. and Canada trends much more benign; boosts unit demand

The Americas: Core Consumer Price InflationYear-to-Year Percent Change, Through February

U.S. and Canada are a contrast to Mexico, Brazil

United States

Brazil

Canada

Mexico

-1%

1%

3%

5%

7%

9%

11%

13%

15%

Mar-11 Mar-12



20

40

60

80

100

120

Apr-11 Apr-12

The Americas: Consumer Confidence

9

• U.S. confidence volatile in face of tax/spend issues

• Canada holding up despite weak housing, U.S concerns

• Brazil confidence sagging amid weaker retail sales, elevated inflation

• Mexico holding up

The Americas: Consumer ConfidenceIndices through February*

Brazil trending weaker; Canada, U.S. volatile, if not weaker

United States

Brazil

Canada

Mexico

•Through February, except the United States is through March




Current Retail Conditions: Brazil, Mexico

10

• Brazil and, to lesser degree, Mexico show troubling signs in terms of inflation indicators

• Brazil also is showing weak investment trends as rising wages dampen competitiveness

• These factors may increasingly hurt retail sales growth

The Americas: Selected IndicatorsQ4 2012 or Latest Available Month

1 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales2 Estimated by Kantar Retail based on reported inflation-adjusted growthY-to-Y = Year-over-Year change; Q-to-Q = change from prior quarter; M-to-M = change from prior month. Chg Y-to-Y = rate of Year-over-Year change in percentage points; Same for quarterly and monthly growth. All data is seasonally adjusted unless indicated by "NSA" or Not Seasonally Adjusted

Growth

Period Y-to-YQ-to-Q or

M-to-MChg

Y-to-YChg Q-to-Q or M-to-M

GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 3.3% 3.1% 0.0% 1.6%Residential & Business Investment (Inflation-Adjusted) Q4 '12 3.5% -2.0% -2.1% -3.3%Consumer Spending (Inflation-Adjusted) Q4 '12 3.5% 4.4% 1.4% -0.5%Retail Sales 1,2 Jan-13 6.0% 0.1% -1.0% 1.1%Consumer Confidence (Points) 1 Feb-13 4.9 0.2 -0.6 -0.2CPI Headline Index, Not Seasonally Adjusted (NSA) Feb-13 3.6% 0.5% 0.3% 0.1%CPI Food Index, Not Seasonally Adjusted (NSA) Feb-13 5.6% 0.1% 0.3% -0.1%CPI Core Index, goods excluding food and fuel (NSA) Feb-13 3.3% 0.1% -0.4% 0.0%

Growth


M-to-MChg


GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 1.4% 2.2% 0.5% 0.7%Residential & Business Investment (Inflation-Adjusted) Q4 '12 -4.4% 1.9% 1.2% 9.2%Consumer Spending (Inflation-Adjusted) Q4 '12 3.8% 4.7% 0.3% 0.6%Retail Sales 1 Jan-13 12.3% 0.8% -1.2% 0.1%Consumer Confidence (Points) 1 Feb-13 -0.7 -1.3 -1.4 0.0CPI Headline Index, Not Seasonally Adjusted (NSA) Feb-13 6.8% 0.5% 0.1% -0.4%CPI Food Index, Not Seasonally Adjusted (NSA) Feb-13 13.4% 1.6% 1.5% -0.5%CPI Core Index, excluding food and fuel (NSA) Feb-13 5.6% 0.3% -0.3% -0.4%

Mexico

Brazil




Current Retail Conditions: Canada, U.S.

11

• Weak exports and homebuilding a drag on Canada

• U.S. positive in some key measures, but tax/spend issues have tripped up confidence

• Muted core and food price inflation is a positive for unit demand growth in both countries

The Americas: Selected IndicatorsQ4 2012 or Latest Available Month

1 A three-month moving average is used to smooth out volatility in consumer confidence and retail sales2 Estimated by Kantar Retail based on reported inflation-adjusted growthY-to-Y = Year-over-Year change; Q-to-Q = change from prior quarter; M-to-M = change from prior month. Chg Y-to-Y = rate of Year-over-Year change in percentage points; Same for quarterly and monthly growth. All data is seasonally adjusted unless indicated by "NSA" or Not Seasonally Adjusted

Growth


M-to-MChg


GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 1.1% 0.6% -0.4% -0.1%Residential & Business Investment (Inflation-Adjusted) Q4 '12 3.1% 2.9% -0.1% 4.9%Consumer Spending (Inflation-Adjusted) Q4 '12 2.0% 2.7% 0.1% -0.1%Retail Sales Excluding Auto & Fuel Channels 1 Jan-13 0.4% 0.0% -0.3% 0.2%Consumer Confidence (Points) 1 Feb-13 5.6 -2.2 -3.5 -7.3CPI Headline Index Feb-13 1.2% 1.2% 0.7% 1.1%CPI Food Index Feb-13 1.9% 1.0% 0.8% 0.7%CPI Core Index Feb-13 1.4% 0.8% 0.4% 0.8%

Growth


M-to-MChg


GDP (Inflation-Adjusted), Annualized Growth Rate Q4 '12 1.7% 0.4% -0.9% -2.7%Residential & Business Investment (Inflation-Adjusted) Q4 '12 7.2% 14.0% 1.0% 13.1%Consumer Spending (Inflation-Adjusted) Q4 '12 1.8% 1.8% 0.0% 0.3%Retail Sales Excluding Auto & Fuel Channels 1 Feb-13 4.1% 0.4% 0.1% -0.1%Consumer Confidence (Points) 1 Mar-13 -5.5 -2.3 -3.9 -1.2CPI (Headline Index) Feb-13 2.0% 0.7% 0.4% 0.7%CPI Food Index Feb-13 1.2% 0.1% 0.1% 0.1%CPI (Core Index, excluding food and fuel) Feb-13 2.0% 0.2% 0.1% -0.1%

Canada

United States



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Doug Hermanson

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T: +614.355.4044

Chief Economist

KRIQ website: Macroeconomics Insights Topics & Trends > Macroeconomics

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F: +614.355.4059

Economist

presented by: macroeconomic scorecard: the americas march 2013 economist doug hermanson

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