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Brazil: GDP contracts for second consecutive quarter, Brazil enters technical recession

August 29, 2014

In the second quarter, GDP contracted 0.6% over the previous quarter in seasonally-adjusted terms, which marked the largest contraction since Q1 2009 and was steeper than market expectations of a 0.4% decrease. The Brazil Institute of Geography and Statistics (IBGE) revised the Q1 figure down to a 0.2% drop (previously reported: +0.2% quarter-on-quarter) and that, coupled with the Q2 decline, indicates that Brazil is now in a technical recession. The Q2 contraction resulted from a deterioration in domestic demand.

Domestic demand shrunk 2.0% in Q2 (Q1: -0.9+% quarter-on-quarter), which marked the worst result since Q1 2009. Fixed investment fell further from a 2.8% decrease in Q1 to a 5.3% contraction in Q2. Government consumption also deteriorated in Q2; it swung from a 0.4% increase in Q1 to a 0.7% decrease. In contrast, private consumption expanded 0.3% over the previous quarter, which was up from a 0.2% fall in Q1.

On the external side of the economy, exports of goods and services expanded 2.8% in Q2, which markedly contrasted the 3.8% contraction tallied in Q1. Conversely, imports fell 2.1% over the previous quarter, which contrasted the 0.9% increase recorded in the previous period.

The economy contracted 0.9% in Q2 compared to the same quarter last year, which contrasted the 1.9% increase tallied in Q1.

The Central Bank’s Inflation Report from June indicates that it expects GDP to grow 1.6% in 2014 and to accelerate to a 1.8% expansion in 2015. LatinFocus Consensus Forecast panelists expect the economy to expand 1.0% in 2014, which is down 0.2 percentage points from last month’s estimate. For 2015, the panel sees GDP growth at 1.5%.


Author: Angela Bouzanis, Senior Economist

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Brazil GDP Q2 2014

Note: Quarter-on-quarter changes of seasonally adjusted GDP and year-on-year variation in %.
Source: Brazil Institute of Geography and Statistics (IBGE) and LatinFocus Consensus Forecast.


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