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Brazil Economic Activity October 2023

Brazil: Economic activity remains unchanged in October

The Brazilian economy started the fourth quarter on a sour note: Economic activity slid 0.1% in month-on-month seasonally adjusted terms in October, which was a deterioration from September’s flat reading.

On an annual basis, economic activity rose at a quicker rate of 1.5% in October (September: +0.1% yoy), the best reading since June. Still, the trend pointed down, with the annual average growth of economic activity coming in at a 15-month low of 2.2%, down from September’s 2.4%.

Meanwhile, retail sales declined in October, posting a 0.3% seasonally adjusted month-on-month fall (September: +0.5% s.a. mom). Conversely, industrial output growth was stable at September’s 0.1% in October, and accelerated to an eight-month high of 0.5% month on month in November.

October’s decline surprised some market analysts to the downside once again. Despite the rather aggressive loosening cycle the Central Bank of Brazil embarked on in August—cutting rates by a cumulative 200 basis points through December—the still-restrictive monetary policy stance has taken a toll on the economy. Elevated borrowing costs have dampened investment activity, and the services sector—which accounts for roughly 70% of GDP—has slowed, likely hindering tax revenue and public coffers in turn.

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