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Brazil GDP Q2 2023

Brazil: GDP growth slows in Q2

GDP growth slowed to 0.9% on a seasonally adjusted quarter-on-quarter basis in the second quarter, down from 1.8% in the first quarter; the cumulative 1,175 basis points in Central Bank hikes from March 2021 to August 2022 succeeded in cooling the economy. Despite the slowdown, the result outperformed market expectations: Economists polled by Reuters had anticipated a 0.3% increase.

The quarterly slowdown was largely due to the external sector detracting from overall growth. More positively, there was a broad-based improvement on the domestic front: Household spending growth edged up to 0.9% seasonally adjusted quarter-on-quarter in the second quarter (Q1: +0.7% s.a. qoq), marking the best reading in a year. The acceleration was largely supported by softer price pressures in Q2, a fall in the unemployment rate (Q2: 8.3%; Q1: 8.6%) and fiscal stimulus under the new administration. That said, still-elevated interest rates likely capped the overall improvement. Moreover, government spending accelerated to a 0.7% increase in Q2 (Q1: +0.4% s.a. qoq) and fixed investment rebounded, growing 0.1% in Q2, contrasting the 3.4% decrease recorded in the prior quarter.

Turning to the external sector, exports of goods and services increased 2.9% on a seasonally adjusted quarterly basis in the second quarter, which was above the first quarter’s 0.3% expansion. Meanwhile, imports of goods and services bounced back, growing 4.5% in Q2 (Q1: -3.9% s.a. qoq). Consequently, the external sector detracted from overall growth.

On an annual basis, economic growth moderated to 3.4% in Q2, following the previous period’s 4.0% increase. Despite the moderation, the result surprised markets on the upside as analysts polled by Reuters had penciled in a 2.7% year-on-year expansion.

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