Domestic Demand in Brazil
Brazil - Domestic Demand
Growth slumps in Q1
Recently-released GDP data revealed that the recovery started off 2018 on a sour note. GDP rose 1.2% annually in the first quarter, just above half the pace of the fourth quarter’s 2.1% expansion. The result was slightly below market expectations of 1.3% growth. Notably, the first quarter had significantly fewer working days than the same period last year, which weighed on the overall growth reading. The data confirms that Brazil’s recovery from its worst recession in modern history is on weak footing ahead of presidential elections later this year.
The first quarter’s slowdown was largely broad-based with most components of GDP deteriorating from the fourth quarter. Fixed investment growth slowed from 3.8% annually in Q4 to 3.5% in Q1, although it still held up relatively well in the face of political uncertainty. Government spending fell 0.8% reflecting fiscal adjustment efforts (Q4 2017: -0.4% year-on-year). Meanwhile, private consumption was a bright spot in the data, expanding 2.8% annually, the best reading since Q4 2014. Low inflation and improving confidence likely drove the uptick.
On the external side, both exports and imports growth fell in the first quarter. Exports rose 6.0% year-on-year, below the fourth quarter’s 8.1% increase. While higher commodity prices aided exports revenues, lower agricultural production and a high base of comparison due to last year’s bumper output weighed on export growth. Meanwhile, imports grew 7.7% (Q4: +8.1% yoy).
On a quarter-on-quarter basis, GDP expanded a seasonally-adjusted 0.4%, above Q4’s 0.2% rise.
Looking ahead, the recovery is expected to regain some lost momentum in the coming quarters, chiefly thanks to higher household spending amid an improving labor market and low inflation. However, reduced demand for emerging market assets due to rising U.S. interest rates, political uncertainty and a truckers’ strike will weigh on activity. In May, a nationwide protest by the truckers’ union Abcam over diesel price hikes disrupted economic activity throughout the country, halting exports and leading to some shortages of goods in cities. A similar strike in 1999 that latest five days dented economic activity notably.
LatinFocus Consensus Forecast panelists are still taking the latest developments into consideration and see GDP expanding 2.5% in 2018, which is unchanged from last month’s estimate. For 2019, the panel sees the economy growing 2.8%.
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||11.32||-0.82 %||Jul 17|
|Exchange Rate||3.84||-0.13 %||Jul 17|
|Stock Market||78,130||-0.11 %||Jul 17|
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July 11, 2018
Retail sales (excluding cars and construction) fell 0.6% from the previous month in seasonally-adjusted terms in May, contrasting April’s revised 0.7% expansion (previously reported: +1.0% month-on-month).
July 6, 2018
Consumer prices rose 1.26% in June over the previous month, the sharpest increase since January 2016.
July 3, 2018
Industrial production plunged in May, dropping at the fastest pace since December 2008.
July 2, 2018
Business sentiment in Brazil declined in June, with the Getulio Vargas Foundation’s (FGV, Fundaçao Getúlio Vargas) business confidence index falling to 110.1 points in June from 111.1 points in May.
July 2, 2018
Conditions in Brazil’s manufacturing sector weakened in June according to the IHS Markit.