Domestic Demand in Brazil
Brazil - Domestic Demand
Growth revives in Q3 after truckers’ strike ends
Recently-released GDP data revealed that the recovery revived in the third quarter, after activity was hit by the nationwide truckers’ strike in the previous period. GDP rose a seasonally-adjusted 0.8% over the previous quarter in Q3, above Q2’s 0.2% and the best result since Q1 2017. The result was broadly in line with Met the why particular’ expectations.
Looking at the details, a better performance from the domestic economy drove the third quarter’s acceleration, with private consumption, government consumption and fixed investment all picking up pace. Notably, fixed investment surged, growing 6.6% quarter-on-quarter, contrasting the 1.3% fall recorded in the second quarter. The end of economic disruptions caused by the May–June truckers’ strike drove a better performance by the domestic economy at large, while record-low interest rates also helped to prop up growth. Moreover, private consumption growth rose from 0.1% in Q2 to 0.6% in Q3, also aided by a government measure that allowed workers to access inactive severance accounts (PIS/Pasep funds).
The external sector’s result was skewed by the special customs program Repetro, which caused imports of oil platforms to soar in the quarter. Imports expanded 11.2% over the previous quarter in Q3, contrasting the 1.2% fall recorded in Q2. Export growth also rebounded in the quarter after the truckers’ strike had prevented goods from reaching the country’s ports in Q2. Exports grew 6.7% (Q2: -5.1% qoq).
On an annual basis, GDP growth also picked up pace rising to 1.3% in Q3, from a revised 0.9% in Q2 (previously reported: +1.0% year-on-year). Soaring investment partly linked with the Repetro program drove the result, while household consumption eased in the third quarter. Government spending also picked up pace but remained modest overall. Similarly, to the quarter-on-quarter readings, export growth rebounded in annual terms and imports soared due to the special customs program.
Looking ahead, the recovery is expected to gradually gain steam in the coming quarters. An improving labor market and low interest rates should fuel the domestic economy’s momentum; however, a less supportive global backdrop is expected to keep growth moderate overall. In addition, President-elect Jair Bolsonaro’s pledges to speed up privatizations, implement the pension reform and rein in government spending should also help correct depleted government coffers and shore up confidence in the economy. So far, his appointment of market-friendly and reform-oriented Paulo Guedes as finance minister and decision to keep Mansueto Almeida as treasury secretary have been well received by the financial markets.
Brazil GDP Forecast
LatinFocus Consensus Forecast panelists see GDP expanding 2.3% in 2019, which is unchanged from last month’s estimate. For 2020, the panel sees the economy growing 2.5%.
Brazil - Domestic Demand Data
|Domestic Demand (annual variation in %)||3.7||0.3||-6.3||-5.1||0.9|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||8.80||-0.82 %||Feb 14|
|Exchange Rate||3.72||-0.13 %||Feb 14|
|Stock Market||98,015||-0.11 %||Feb 14|
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February 13, 2019
Retail sales (excluding cars and construction) fell 2.2% from the previous month in seasonally-adjusted terms in December, notably contrasting November’s revised 3.1% expansion (previously reported: +2.9% month-on-month) and the largest drop since January 2016. Declines were recorded in five of the eight categories of the index, with notably contractions in sales of other articles for personal and domestic use, and furniture and household appliances. On an annual basis, retail sales rose 0.6% in December, notably below November’s 4.5% expansion.
February 8, 2019
Consumer prices rose 0.32% in January over the previous month, accelerating from December’s 0.15% increase.
February 6, 2019
At its 5–6 February meeting, the Central Bank of Brazil’s Monetary Policy Committee (Comité de Política Monetária, COPOM) unanimously decided to keep the benchmark SELIC interest rate at its record low of 6.50%, where it has rested since the Central Bank paused its long and aggressive easing cycle in March.
February 4, 2019
Conditions in Brazil’s manufacturing sector improved at the start of 2019.
February 1, 2019
Industrial production rebounded in December, growing 0.2% month-on-month in seasonally-adjusted terms.