Brazil: Growth revives in Q3 after truckers' strike ends
November 30, 2018
Recently-released GDP data revealed that the recovery revived in the third quarter, after activity was hit by the nationwide truckers’ strike in the previous period. GDP rose a seasonally-adjusted 0.8% over the previous quarter in Q3, above Q2’s 0.2% and the best result since Q1 2017. The result was broadly in line with FocusEconomics’ expectations.
Looking at the details, a better performance from the domestic economy drove the third quarter’s acceleration, with private consumption, government consumption and fixed investment all picking up pace. Notably, fixed investment surged, growing 6.6% quarter-on-quarter, contrasting the 1.3% fall recorded in the second quarter. The end of economic disruptions caused by the May–June truckers’ strike drove a better performance by the domestic economy at large, while record-low interest rates also helped to prop up growth. Moreover, private consumption growth rose from 0.1% in Q2 to 0.6% in Q3, also aided by a government measure that allowed workers to access inactive severance accounts (PIS/Pasep funds).
The external sector’s result was skewed by the special customs program Repetro, which caused imports of oil platforms to soar in the quarter. Imports expanded 10.2% over the previous quarter in Q3, contrasting the 1.2% fall recorded in Q2. Export growth also rebounded in the quarter after the truckers’ strike had prevented goods from reaching the country’s ports in Q2. Exports grew 6.7% (Q2: -5.1% qoq).
On an annual basis, GDP growth also picked up pace rising to 1.3% in Q3, from a revised 0.9% in Q2 (previously reported: +1.0% year-on-year). Soaring investment partly linked with the Repetro program drove the result, while household consumption eased in the third quarter. Government spending also picked up pace but remained modest overall. Similarly, to the quarter-on-quarter readings, export growth rebounded in annual terms and imports soared due to the special customs program.
Looking ahead, the recovery is expected to gradually gain steam in the coming quarters. An improving labor market and low interest rates should fuel the domestic economy’s momentum; however, a less supportive global backdrop is expected to keep growth moderate overall. In addition, President-elect Jair Bolsonaro’s pledges to speed up privatizations, implement the pension reform and rein in government spending should also help correct depleted government coffers and shore up confidence in the economy. So far, his appointment of market-friendly and reform-oriented Paulo Guedes as finance minister and decision to keep Mansueto Almeida as treasury secretary have been well received by the financial markets.
Brazil GDP Forecast
LatinFocus Consensus Forecast panelists see GDP expanding 2.3% in 2019, which is unchanged from last month’s estimate. For 2020, the panel sees the economy growing 2.5%.