Brazil: Economic activity growth overshoots market expectations again in February
Latest reading: The Brazilian economy lost some steam halfway into Q1 2025, with economic activity growth falling to 0.4% month on month in seasonally adjusted terms in February, less than half of January’s seven-month high rise of 0.9%. Still, growth overshot market projections for the second month running.
On an annual basis, economic activity rose 4.1% in February, which was better than January’s 3.6% expansion and represented a four-month high. Meanwhile, the trend was unchanged, with the annual average growth of economic activity coming in at January’s 3.8% in February.
Industrial output contracted 0.1% in February, missing market projections of an expansion and deteriorating from January’s flat outturn. More positively, retail sales grew at a faster 0.5% month-on-month seasonally adjusted pace in February (January: +0.2% mom s.a.). February’s rise matched market expectations and brought retail sales to their highest since records began in 2000.
Looking at sectoral data, services output—which accounts for roughly 60% of GDP—rebounded, posting a seasonally adjusted 0.8% monthly expansion (January: -0.6% mom s.a.), the strongest result in four months and smashing market expectations.
Outlook: Our Consensus forecast is for quarter-on-quarter GDP growth to be roughly four times higher in Q1 2025 compared to the 0.2% rise logged in the prior three months. January’s sharp upturn in the economic activity index—a GDP proxy—and February’s continued growth bear out this projection.
Looking ahead, our panelists expect sequential GDP growth to gradually decelerate from Q2 to a near halt toward the end of the year, dampened by higher interest rates and inflation. Accordingly, overall in 2025, our Consensus is for the economy to expand at a softer pace than last year, driven by slowdowns in private consumption and fixed investment.
Panelist insight: Reflecting on risks to the near-term outlook, analysts at the EIU mentioned:
“Uncertainty surrounding the October 2026 election and the policy direction of the next administration will also weigh on investor sentiment, as will concerns over the broader impacts of US trade protectionism on US and global growth, further reducing activity and increasing costs at the margin.”