Consumption in Brazil

Brazil - Consumption

Economic growth surprises on the upside in Q2

Underlying momentum strengthened in the second quarter of 2022, with GDP growth accelerating to a seasonally-adjusted quarter-on-quarter rate of 1.2%, marginally above the prior quarter’s 1.1% increase. The reading, which marked the strongest expansion since Q4 2020, beat market expectations of a 0.9% rise. Meanwhile, on an annual basis, the economy also surprised on the upside and grew at a brisker pace of 3.2%, nearly doubling the previous quarter’s 1.7% growth rate.

Domestically, the quarterly improvement came on the back of a rebound in fixed investment in sequential terms (Q2: +4.8% s.a. qoq; Q1: -3.0% s.a. qoq). Additionally, private consumption growth picked up, accelerating to a quarterly 2.6% in seasonally-adjusted terms, up from Q1’s 0.5% growth. The lower unemployment rate likely supported this in the period (Q2: 9.9%; Q1: 11.1%), which should have shielded consumers from mounting price pressures and higher interest rates in the quarter. The improvements in fixed investment and private consumption more than offset government spending declining at the sharpest pace in two years (Q2: -0.9% s.a. qoq; Q1: -0.1% s.a. qoq).

Turning to the external sector, exports of goods and services contracted 2.5% in Q2, swinging from the previous quarter’s 5.7% sequential expansion. Conversely, imports of goods and services returned to growth, increasing 7.6% in the second quarter (Q1: -4.0% s.a. qoq). Consequently, the external sector detracted 0.4 percentage points from overall growth, contrasting the prior quarter’s 1.8 percentage point contribution.

The LatinFocus panel of analysts see GDP expanding 1.5% in 2022, which is up 0.2 percentage points from last month’s estimate. For 2023, the panel sees the economy growing 0.9%.