Brazil: Economic growth tops expectations for third month in a row in March
Latest reading: The Brazilian economy powered through at the end of the first quarter. Economic activity—a proxy for GDP—increased 0.8% in month-on-month seasonally adjusted terms in March, above February’s upwardly revised 0.5% increase. March’s improvement smashed market expectations for a third month running. Looking at the details of the release, the monthly acceleration was due to a faster rise in the services sector—which accounts for roughly 60% of GDP—and a rebound in the industrial sector, which grew at the strongest clip since December 2023.
Additionally, March’s result meant that economic activity expanded 1.3% quarter on quarter in Q1, above Q4’s 0.5% rise and the strongest in two years; this red-hot growth came despite the Central Bank’s aggressive recent tightening of monetary policy.
On an annual basis, economic activity increased 3.5% in March, which was below February’s 4.1% expansion. Meanwhile, annual average economic activity growth rose to 4.2% in March (February: +3.8%), pointing to an improving trend.
Outlook: In line with this data for economic activity, our panelists see sequential GDP growth in Q1 2025 around five times higher than in Q4 2024. Moving forward, our Consensus Forecast is for GDP growth to decelerate sharply in Q2 and to slow to a crawl in Q3 and Q4 following a robust start to 2025. GDP growth will cool as the impact of the interest rate hikes starts to trickle down to the economy. Private consumption growth will slow ahead, further weighed on by higher living costs as inflation remains stubbornly elevated.