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Brazil Economic Activity September 2023

Brazil: Decline in economic activity softens in September

The Brazilian economy ended the third quarter on a sour note; economic activity declined 0.1% month on month in seasonally adjusted terms in September (August: -0.8% mom). While the downturn in activity softened, the figure underperformed versus market expectations once again.

On an annual basis, economic activity rose 0.3% in September, which was below August’s 1.2% expansion and marked the weakest result since October 2021. Accordingly, the trend pointed down and annual average economic activity growth fell to 2.5% in September (August: +2.8%), which marked an over one-year low.

Meanwhile, retail sales rebounded in September and grew 0.6% month on month in seasonally adjusted terms (August: -0.1% mom). Conversely, industrial output growth waned in the same month, slowing to a marginal monthly 0.1% (August: +0.2% mom).

Although the economy outperformed expectations in H1, it has done the opposite in August–September. Despite recent interest rate cuts, activity is feeling the pinch of the delayed effects of the cumulative 1,175 basis points worth of rate hikes in February 2021–August 2022. Slowing activity, especially in the services sector—which accounts for around 70% of Brazilian GDP—will also hinder tax revenue and public finances in turn.

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