Brazil: Economy slows in the second quarter
September 2, 2011
In the second quarter, GDP expanded a seasonally adjusted 0.8% over the previous quarter, which was below the revised 1.2% increase seen in the first quarter (previously reported: +1.3% quarter-on-quarter) but was in line with market expectations. Compared to the same quarter last year, the economy added 3.1% (Q1: +4.2% year-on-year). Domestic demand continued to support economic growth. Private consumption accelerated from 0.7% qoq in Q1 to 1.0% in Q2 while fixed investment grew 1.7% in the second quarter, up from the 1.0% expansion in the first. The deceleration in economic growth over the previous quarter mainly reflected a sharp rebound in imports, boosted by the strong Brazilian real. Consequently, the net contribution from the external sector to overall growth deteriorated significantly. Exports of goods and services rebounded from a 3.1% contraction in the first quarter to a 2.3% increase in the second, while imports added 6.1% in the second quarter, contrasting the 1.4% decline in the first. As a result, the net contribution from the external sector to overall economic growth deteriorated from minus 2.9 percentage points in the first quarter to minus 5.9 percentage points in the second. At the sector level, services drove the economic expansion in the second quarter by adding 0.8% (Q1: +0.7% qoq). The industrial sector deteriorated notably and slowed from 2.2% growth in the first quarter to 0.2% in the second, dragged by weaker manufacturing. The agricultural sector contracted 0.1% in the second quarter (Q1: +2.9% qoq). The Central Bank expects GDP to grow 4.5% in 2011.