The Brazilian economy slows down strongly in the second trimester but still beats forecasts
By Marcela Ayres
Brasilia (Reuters) – Brazil’s economy lost momentum in the second quarter but has always outperformed market expectations, motivated by the activity of resilient services and gains in the extractive industry, showed official data on Tuesday.
The gross domestic product in the largest economy in Latin America increased by 0.4% during the period from April to June compared to the previous quarter, said Ibge Agency Ibge, greater than 0.3% expected by economists in a reuters survey.
This marked an steep slowdown in revised growth of 1.3% in the first quarter, when seasonal agricultural production increased the performance of agricultural power. Agricultural production slipped 0.1% in the second quarter from the previous three months.
Industrial production increased by 0.5%, helped by an increase of 5.4% of extractive industries. The services, which represent approximately 70% of Brazil’s GDP, increased by 0.6%, supported by a robust labor market.
On the demand side, the investments measured by the gross fixed capital formation fell 2.2% after generating growth in the first quarter, under pressure by high borrowing costs.
The central bank has increased interest rates by 450 base points since September from last year to 15%, a summit of almost two decades and kept them stable in July.
Government consumption decreased by 0.6%. But household consumption increased by 0.5%, supported by measures from the government of President Luiz Inacio Lula da Silva to maintain wage gains.
One year, GDP increased by 2.2%, in accordance with the expectations of the Reuters survey. The government projected in July an expansion of 2.5% in 2025, following 3.4% of growth last year.
(Report by Marcela Ayres; edition by Andrew Heavens and Bernadette Baum)
