Brazil: Economy gains steam in Q1
June 2, 2022
GDP growth accelerated to 1.0% on a seasonally-adjusted quarter-on-quarter basis in the first quarter, from 0.7% in the fourth quarter of last year. Q1's reading marked the best reading since Q1 2021.
Household spending growth was stable at 0.7% in Q1 (Q4 2021: +0.7% s.a. qoq), likely supported by lower unemployment and renewed policy stimulus in the form of tax cuts, subsidies and a revamped cash transfer program (Auxilio Brasil). Government consumption growth clocked 0.1% (Q4 2021: +0.9% s.a. qoq). Meanwhile, fixed investment contracted 3.5% in Q1, marking the worst reading since Q2 2021 (Q4 2021: +0.8% s.a. qoq), amid political uncertainty and tighter financial conditions.
Exports of goods and services bounced back, growing 5.0% seasonally-adjusted quarter-on-quarter in the first quarter, which marked the best reading since Q2 2021 (Q4 2021: -0.2% s.a. qoq). Conversely, imports of goods and services deteriorated, contracting 4.6% in Q1 (Q4 2021: +0.1% s.a. qoq).
On an annual basis, economic growth edged up to 1.7% in Q1, compared to the previous quarter's 1.6% expansion.
Regarding the outlook for the rest of the year, Goldman Sachs’ Alberto Ramos said:
“Part of the resilient Q1 growth momentum will carry over to Q2, but H2 is expected to face intense headwinds from, among other things, very tight domestic financial conditions, double digit inflation, record high level of household indebtedness, the noise and uncertainty generated by a polarizing election in Oct-Nov, and the fading favorable impact of the reopening of the economy.”
Author: Oliver Reynolds, Economist