Brazil: Economic activity dips in August
The Brazilian economy faltered halfway through the third quarter; economic activity dropped 0.8% in seasonally adjusted month-on-month terms in August, which contrasted with July’s 0.4% increase. The downturn surprised markets on the downside, as a smaller contraction had been anticipated.
On an annual basis, economic activity rose at a faster rate of 1.3% in August (July: +0.8% yoy). Nevertheless, the trend pointed down, with annual average growth in economic activity coming in at 2.8%, down from July’s 3.2% reading.
Meanwhile, retail sales contracted by a seasonally adjusted 0.2% mom in August, deteriorating from July’s 0.7% increase. Meanwhile, industrial output growth slowed to 0.1% in September, down from the prior month’s 0.2% increase in monthly seasonally adjusted terms.
August’s downbeat data comes after activity outperformed expectations in both the second quarter and July and seems to confirm projections of an economic slowdown in the third quarter. In the remaining months of H2, activity will likely cool as the effects of a bumper soybean harvest fade, although lower interest rates will provide some support.
Analysts at the EIU stand ready to downwardly revise their GDP growth forecasts:
“The sharp output contraction in August serves as a warning flag that domestic activity could slow more sharply than we currently expect. […] We expect economic growth to moderate over the coming months, reflecting a normalisation following strong results in the first half of the year.”