Fynsa
The continued weakness of the economy is a cause for concern. Activity during April, as measured by the Imacec, fell 1.1% YoY, below market expectations of -0.5% YoY, and our own (-0.8% YoY).which were -0.5% YoY, and our own (-0.8% YoY). Although the seasonally adjusted series showed no variation, a large part of this result was explained by the behavior of mining, which, as we know, shows great volatility from one month to the next. In fact, only last month it had a negative influence on the aggregate index. Thus, if we eliminate this extractive sector from the result, the well-known non-mining Imacec, we see that it showed a reduction of 1.6% YoY, due to a seasonally adjusted fall of 0.7% with respect to March. Nothing encouraging.
However, this was not the only thing. One of the most important markets for the economy, labor, is not faring well either. Although the unemployment rate decreased from 8.8% to 8.7%, the broader reading does not look so positive. In fact, although there was a slight job creation (1,000 jobs), the drop in unemployment was mostly due to an outflow of people from the labor force (15,000). By category, salaried employees, both public and private, destroyed 35 thousand jobs, which were compensated by self-employment. It is true that during this time of the year there is a seasonal component that historically explains these results, but in this past year it is not only that, since the seasonally adjusted unemployment rate has been increasing.
In this context, more than a few voices have begun to advance their expectations regarding a cycle of rate cuts by the Central Bank. Economic weakness would be evidence enough that the rate should come down. Don't get me wrong, I probably would have thought the same a while ago, or in a "normal" situation, but that is not the reality today. The economic weakness did not start with this data, it has been on the table for about a year now and inflation was far from giving respite in this period. I agree that the CPI figures for April were flattering, but they are still only one figure in a series that has not been characterized by generating trends with a single figure. An imminent rate cut announcement seems to me to be too risky a gamble in a process of regaining public confidence by the Central Bank. A false step could be too costly.
Therefore, and as we have commented in previous columnsIn trying to read the Board, I see a more conservative stance as much more likely, in the event that it is warranted, to prefer to cut back more aggressively when the time comes, rather than to start cutting back more timidly earlier for fear of making a mistake. Economic weakness is a necessary but not sufficient condition. Thus, we maintain our projection that we may have news on the TPM in September, and not before.
