WEEKLY REPORT A lighter data week reinforces signs of gradual slowdown in Brazil and moderating growth in the US – 02/20
✅ The December IBC-Br reinforced the perception of a loss of momentum in activity at year-end, though without signaling an abrupt slowdown. The index declined 0.2% MoM following a more volatile trajectory throughout 2025, coming in below our forecast but above the market median. On a quarterly basis, activity expanded 0.4% in the period ending in December compared with the previous period, suggesting a more gradual deceleration than initially anticipated. For now, we maintain our expectation of stable growth in the fourth quarter, such that GDP should close the year at around 2.2%, albeit with some upside bias.
✅ In the United States, the combined reading of recent data reinforces the view that the economy continues to expand, albeit at a more moderate pace. On the activity side, fourth-quarter GDP grew 1.4% SAAR, below expectations, reflecting a broad-based slowdown in consumption, a reversal of the export boost seen in the previous quarter, and a sharp contraction in federal spending. On the inflation front, the PCE ended the year still above target, with a notable rebound in goods prices associated with tariff pass-through and inventory normalization, while services inflation continues to decelerate only gradually. Taken together, the information reinforces the view of a patient and data-dependent Fed.
✅ Finally, on the institutional and trade front, the US Supreme Court invalidated the global tariffs implemented by the Trump administration. The Court ruled, by a 6 to 3 majority, that the executive branch exceeded its authority by invoking emergency powers to justify the broad application of so-called “reciprocal” tariffs. The decision represents a meaningful setback to the recent trade strategy and introduces a new layer of legal uncertainty, as the Court did not immediately define the treatment of potential refunds to importers, an issue that will now be addressed in lower courts and could involve significant sums. Following the announcement, Trump criticized the ruling, calling it “a disgrace,” and stated that he already has a “plan B” to preserve the tariff policy through other mechanisms.
