Brazil: Economic growth slows in third quarter
December 9, 2010
In the third quarter, GDP increased 0.5% over the previous quarter in seasonally adjusted terms. The reading, which followed a 1.8% rise in the second quarter (previously reported: +2.7% quarter-on-quarter), came in above market expectations of 0.4% growth. On a year-on-year basis, the economy expanded 6.8% in Q3. The deceleration over the previous quarter was mostly driven by flat public consumption growth in the third quarter (Q2: +1.9% quarter-on-quarter), as well as decelerating investment (Q2: +4.3% qoq; Q3: +3.9% qoq). On the other hand, growth in private consumption accelerated, adding 1.6% in the third quarter, up from the 0.9% increase experienced in the second quarter. In the external sector, growth in imports continued to outpace exports. Exports expanded 2.4% in the third quarter (Q2: +0.1% qoq), while imports accelerated from a 5.8% increase in the second quarter to a 7.4% expansion in the third quarter. A negative contribution from the external sector to overall economic growth is a common symptom of a domestic demand-led growth pattern, which has been the case for the last few years. At the sector level, the deceleration was widespread, as growth slowed in all major sectors. Agriculture led the way with a contraction of 1.5% over the previous quarter (Q2: +2.1% qoq). Industrial output declined 1.3% in the third quarter (Q2: +2.0% qoq), while services, which account for two thirds of GDP, added 1.0% in the third quarter, down from a 1.2% expansion in Q2. The Central Bank currently estimates GDP to grow 4.5% in 2011.