Brazil: Economic activity growth wanes in April but still overshoots market expectations
Latest reading: The Brazilian economy kicked off the second quarter on a softer footing: Economic activity—a proxy for GDP—increased 0.2% in month-on-month seasonally adjusted terms in April, which was a deterioration from March’s downwardly revised 0.7% increase. April’s result overshot market expectations for a fourth month running. Looking at the details of the release, April’s slowdown resulted from the agricultural and industrial sectors swinging to contractions, partly offsetting an acceleration in the services sector—which accounts for roughly 60% of GDP.
On an annual basis, economic activity grew 2.5% in April, which was below March’s upwardly revised 3.6% expansion and marked the worst result since May 2024. Accordingly, the trend pointed down, with the annual average growth of economic activity coming in at 4.0%, down from March’s 4.2%.
Outlook: April’s result bears out our panelists’ projections that sequential economic growth will decelerate to less than a third of its Q1 rate in Q2. Looking further ahead, our Consensus is for quarter-on-quarter GDP growth to virtually halt in Q3–Q4 as the impact of the Central Bank’s ongoing tightening cycle trickles down to the economy. Private consumption is set to rise at a softer pace later this year—despite a strong labor market and sustained wage growth—further dampened by higher living costs as inflation remains stubbornly high, well above the upper bound of the Central Bank’s 1.5–4.5% target.