Brazil: Economy enters technical recession in Q2
August 28, 2015
In the second quarter, GDP fell 1.9% over the previous quarter in seasonally-adjusted terms, which was a deterioration over the 0.7% decrease seen in the previous quarter. As a result of two consecutive contractions, the Brazilian economy entered technical recession in the second quarter. Q2’s drop was also down from the 1.7% contraction that market analysts had expected.
Q2’s contraction was driven by a deterioration in both domestic and external demand. Private consumption dropped 2.1% over the previous quarter, which was down from the 1.5% decrease seen in the first quarter. Moreover, fixed investment plummeted 8.1% in Q2 (Q1: -2.4% quarter-on-quarter). Conversely, government spending swung from a 1.5% contraction in Q1 to a 0.7% expansion in Q2.
On the external side of the economy, growth in exports of goods and services dropped from 16.2% in Q1 to 3.4% in Q2. Conversely, imports contracted 8.8% in Q2, which contrasted the 0.9% expansion tallied in the first quarter. As a result, the external sector deteriorated slightly from a plus 21.6 percentage point contribution in Q1 to a plus 19.9 percentage point contribution in Q2.
On an annual basis, in Q2, the economy contracted 2.6% compared to the same quarter of the previous year, which was a significant deterioration from the 1.6% decrease tallied in Q1. In addition, the result marked the largest contraction since Q1 2009.