Thursday May 25 2017
Brazilian Economy Expected To Start Recovering In 2017
joana.taborda@tradingeconomics.com | luisa.carvalho@tradingeconomics.com

The Brazilian economy is expected to return to growth in 2017 after a plunge in commodities prices, a weaker real, stubbornly high inflation and political crisis led to a 2-year recession, the worst since records began. Yet, recent data points to slow recovery in private investment and production although sustained growth is heavily dependent on the government ability to pass fiscal reforms, reduce fiscal imbalances and restore consumer and business confidence. Yet, the most recent corruption scandal implicating President Temer sent the benchmark stock index and the real to year-to-date lows and the risk of another impeachment raised concerns over the country's prospects.

The Industrial Entrepreneur Confidence Index increased to 53.7 in May from 53.1 in April. It has been recovering since the beginning of 2017 after reaching a record low of 36 in December of 2015. The index held above 50 for the fifth month, signaling managers remain confident in the future amid lower interest rates, fiscal reforms and business-friendly measures the government intends to implement. The manufacturing PMI rose to 50.1 in April, pointing to the first expansion in factory activity since January of 2015. In addition, the services PMI went up to 50.3 in April, also the first expansion since February of 2015.

The inflation rate eased for the eighth straight month to 4.08 percent in April, reaching the lowest since July of 2007 and falling below the central bank target of 4.5 percent for the first time since December of 2009. Yet, the inflation has been slowing faster than anticipated as the real strengthened, prompting the central bank to ease monetary policy. The benchmark Selic rate was already cut by 300bps since October last year, standing at 11.25 percent and is expected to reach 8.5 percent by the end of 2017.

On the negative side, the unemployment has been rising rapidly, breaking record highs and reaching 13.7 percent in March. The economy shed 1.371 million jobs in 2016, following a 1.625 million loss in 2015, bringing employment to 5-year lows and hurting household spending. Yet, retail sales fell 4 percent year-on-year in March of 2017, marking the 24th straight month of decline. The jobless rate is expected to continue to rise during 2017 before starting to fall in 2018 as the economy recovers.

The fiscal deficit was recorded at 8.9 percent in 2016 after reaching a record high of 10.2 percent in 2015 amid falling revenues, several tax exemptions and higher expenditure. The rapid deterioration of the country's finances has significantly raised the country's debt burden, leading to a gross debt of 69.5 percent of the GDP in 2016, higher than 65.5 percent in 2015. The government of Michel Temer already passed a fiscal cap amendment that limits the growth of federal government spending to the rate of inflation for 20 years. It also intends to pass several other reforms including a rise in retirement age, cuts in pensions and social benefits in an attempt to restore fiscal balance and confidence. However, such measures are expected to face strong political opposition.




Wednesday May 10 2017
Brazil Inflation Rate Back To Central Bank Target
IBGE | Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in Brazil increased 4.08 percent year-on-year in April of 2017, following a 4.57 percent rise in March and in line with market expectations of 4.1 percent. The inflation rate slowed for the eighth straight month to the lowest since July of 2007, standing below the central bank target of 4.5 percent for the first time since December of 2009.

Prices rose at a slower pace for: food and beverages (3.51 percent from 4.04 percent in March); housing and utilities (3.72 percent from 4.47 percent); transport (1.68 percent from 1.77 percent); health (8.91 percent from 10.34 percent); personal expenses (6.5 percent from 6.64 percent); furnishings; household equipment (0.46 percent from 1 percent); communication (1.8 percent from 2.74 percent) and education (8.12 percent from 8.3 percent). In contrast, prices went up faster for clothing (2.28 percent from 2.2 percent). 

On a monthly basis, consumer prices increased 0.14 percent, following a 0.25 percent rise in March and compared to market expectations of 0.16 percent. It is the lowest monthly rate in seven months. Biggest downward pressure came from electricity cost (-6.39 percent) and fuels (-1.95 percent). The decline in electricity was due to discounts made to compensate consumers for the undue payment in 2016 of an extra charge to finance the Angra III plant. 




Tuesday May 02 2017
Brazil Trade Surplus At Record High For April Month
Yekaterina Guchshina | yekaterina@tradingeconomics.com

Brazil recorded a USD 6,969 million trade surplus in April of 2017, 43.4 percent higher than a USD 4,861 million surplus a year earlier while below market expectations of USD 7,100 million. It was the record surplus for April month, as exports jumped 27.8 percent year-on-year and imports rose at a slower 13.3 percent.

Exports reached USD 17,686 million, boosted by sales of basic products (29.7 percent), mainly iron ore (87.6 percent), crude oil (58.6 percent), copper (50.9 percent), pork (34.4 percent), soybeans (24.2 percent); coffee (12.6 percent), cotton (5.3 percent) and chicken meat (1.5 percent). Shipments also increased for manufactured (25.7 percent) and semimanufactured products (27.5 percent), namely hydrocarbons (161.6 percent), semimanufactured iron and steel (55.5 percent), sugar (44.7 percent), lumber (32.3 percent) and cargo vehicles (123.3 percent). 

Imports went up to USD 10,717 million, mainly due to purchases of fuels and lubricants (28.5 percent), intermediate goods (16.5 percent) and consumer goods (6.3 percent), while purchases of capital goods fell 5.9 percent. 

Considering the first four months of 2017, exports increased 21.8 percent on a calendar adjusted basis to USD 68.1 billion and imports rose at a slower 9.5 percent to USD 46.7 billion, resulting in a USD 21.4 billion trade surplus. Sales to China jumped 46.8 percent and accounted for nearly 25 percent of total exports. 




Friday April 28 2017
Brazil Unemployment Rate Hits A New Record High Of 13.7%
IBGE | Joana Ferreira | joana.ferreira@tradingeconomics.com

The jobless rate in Brazil rose to a new record high of 13.7 percent in the quarter ended March 2017 from 12 percent in the three months to December 2016 and in line with market expectations. The number of unemployed jumped by 14.9 percent to 14.2 million people while employment fell by 1.5 percent to 88.9 million, bringing the employment rate to a record low of 53.1 percent.

Compared with the October-December 2016 period, the number of unemployed persons jumped 14.9 percent, or by 1.8 million, to 14.2 million, reaching the highest level on record. Employment fell by 1.5 percent, or by 1.3 million, to 88.9 million, with job losses in public administration, defense, social security, education, human health and social services (-3.1 percent, or 484 thousand), trade (-2.5 percent, or -438 thousand), construction (-3.4 percent, or -242 thousand) and agriculture (-2.7 percent, or -240 thousand). By contrast, there were increases in accomomdation and food (3.4 percent, or 165 thousand) and information, communication and financial activities, real estate, professional and administrative (2.1 percent, or 201 thousand).

People attached to the labour force, that is, either employed or unemployed but actively seeking for job rose by 0.5 percent to 103.1 million. Those detached from the labour force were steady at 64.4 million. 

Compared with the same period a year earlier, the number of unemployed people surged 27.8 percent while employment dropped 1.9 percent.

The average real income (BRL 2,110) in the quarter ended March 2017 remained stable compared to the previous quarter (BRL 2,064) and also in relation to the same quarter of 2016 (BRL 2,059).




Wednesday April 12 2017
Brazil Cuts Interest Rate By 100 Bps To 11.25%
Mario | mario@tradingeconomics.com

The Central Bank of Brazil cut its key Selic rate by 100 basis points to 11.25 percent on April 12th 2017, in line with market expectations. It is the fifth straight rate decline, bringing borrowing costs to the lowest since November of 2014 amid slowing inflation and a sticky contraction. It follows tandem 75bps cuts in February and January.

In its policy statement, the central bank highlighted that inflation developments remain favorable. The Copom's inflation forecasts for 2017 and 2018 in the scenario with interest rate and exchange rate paths are around 4.1% and 4.5%, respectively. This scenario assumes a path for the policy interest rate that ends 2017 at 8.5% and remains at that level until the end of 2018 (vs 9.5 percent and 9.0 percent in the previous meeting).

The central bank started its easing cycle in October last year after the inflation rate eased from double digits. Inflation slowed faster than expected in the past seven months due to subdued economic activity and a stronger real. The inflation fell to 4.57 percent in March, easing from a 4.76 percent rise in February. Although the inflation rate remains slightly above central bank's official target of 4.5 percent, it stands at its lowest level since August of 2010.

Still, the economic recovery could take even longer than initially expected: Brazil’s industrial production contracted 0.8 percent year-on-year in February, compared to expectations of a 0.4 percent expansion. On the positive side, the manufacturing PMI rose to a 25-month high of 49.6 in March from 46.9 in February. Moreover, the industrial production report showed manufacturing output increased for the first time in over two years. The median estimate in a central bank poll of economists currently points to growth of 0.41 percent in 2017 and 2.50 percent in 2018. Analysts expect the Selic rate to end 2017 at 8.50 percent (-50bps compared to 4 weeks ago).




Friday April 07 2017
Brazil Inflation Rate Lowest Since August 2010
IBGE | Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in Brazil went up 4.57 percent year-on-year in March of 2017, easing from a 4.76 percent rise in February and compared to market expectations of a 4.54 percent increase. The inflation rate slowed for the seventh month to the lowest since August of 2010, remaining slightly above central bank's official target of 4.5 percent.

Prices rose at a slower pace for: food and beverages (4.04 percent from 4.97 percent in February); transport (1.77 percent from 2.81 percent); clothing (2.2 percent from 3.03 percent); health (10.34 percent from 10.44 percent); personal expenses (6.64 percent from 6.72 percent) and furnishings and household equipment (1 percent from 2 percent). In contrast, prices went up faster for housing and utilities (4.47 percent from 2.59 percent); communication (2.74 percent from 1.68 percent) and education (8.3 percent from 7.95 percent).

On a monthly basis, consumer prices increased 0.25 percent, following a 0.33 percent rise in February and compared to market expectations of 0.23 percent. It is the lowest monthly rate for a March month since 2012. Biggest upward pressure came from electricity cost that went up 4.43 percent.


Tuesday April 04 2017
Brazil Trade Surplus Reaches Record High In March
Joana Taborda | joana.taborda@tradingeconomics.com

Brazil recorded a USD 7,145 million trade surplus in March of 2017, 61.1 percent higher than a USD 4,435 million surplus a year earlier and beating market expectations of USD 6,800 million. It is the largest trade surplus on record as exports jumped 25.6 percent year-on-year and imports rose at a slower 11.9 percent.

Exports reached USD 20,085 million, boosted by sales of basic products (29.7 percent), mainly iron ore (186.7 percent), crude oil (145.9 percent), pork (33.4 percent) and chicken meat (7 percent). Shipments also increased for manufactured (12.3 percent) and semimanufactured products (7.4 percent), namely hydrocarbons (170.9 percent), fuel oils (161.7 percent), synthetic rubber (111.9 percent), semimanufactured iron and steel (109.3 percent), flexible tubes of iron and steel (94.6 percent) and cargo vehicles (67.1 percent).

Imports went up to USD 12,940 million, mainly due to purchases of fuels and lubricants (14.4 percent), intermediate goods (10.6 percent) and consumer goods (1 percent), while purchases of capital goods fell 10.5 percent. 

Considering the first quarter of 2017, exports increased 20.4 percent on a calendar adjusted basis to USD 50.5 billion and imports rose at a slower 8.4 percent to USD 36 billion, resulting in a USD 14.4 billion trade surplus. Sales to China jumped 57.7 percent and accounted for nearly 25 percent of total exports. 


Friday March 31 2017
Brazil Unemployment Rate Rises To Fresh Record High
IBGE | Joana Ferreira | joana.ferreira@tradingeconomics.com

The jobless rate in Brazil rose to a new record high of 13.2 percent in the quarter ended February 2017 from 11.9 percent in the three months to November 2016 and in line with market expectations. The number of unemployed jumped by 11.7 percent to 13.55 million people while employment fell by 1 percent to 89.35 million, bringing the employment rate to a record low of 53.4 percent.

Compared with the September-November 2016 period, the number of unemployed persons jumped 11.7 percent, or by 1,415 thousand, to 13.55 million, reaching the highest level on record. Employment fell by 1 percent to 89.35 million, with job losses in public administration, defense, social security, education, human health and social services (-4.4 percent, or -702 thousand) and industry (-2 percent, or -225 thousand). By contrast, there were increases in housing and food (3.5 percent, or 169 thousand) and information, communication and financial activities, real estate, professional and administrative (2.2 percent, or 215 thousand).

People attached to the labour force, that is, either employed or unemployed but actively seeking for job rose by 0.5 percent or by 550 thousand to 102.89 million. Those detached from the labour force were steady at 64.6 million. The labour force participation rate went up to 61.4 percent from 61.3 percent.

Compared with the same period a year earlier, the number of unemployed people surged 30.6 percent while employment dropped 2 percent.

The average real income (BRL 2,068) in the quarter ended February 2017 remained stable compared to the previous quarter (BRL 2,049) and also in relation to the same quarter of 2016 (BRL 2,037).


Friday March 10 2017
Brazil Inflation Rate Slows To 6-1/2-Year Low
IBGE | Joana Ferreira | joana.ferreira@tradingeconomics.com

Consumer prices in Brazil rose by 4.76 percent in the year to February 2017, down from an increase of 5.35 percent in the previous month and below market expectations of 5.35 percent gain. It was the lowest inflation rate since September 2010. Inflation remained slightly above the central bank's official target of 4.5 percent.

Prices rose at a slower pace for: Food and beverages (4.97 percent from 6.57 percent in January); transport (2.81 percent from 3.19 percent); clothing (3.03 percent from 3.42 percent); health (10.44 percent from 10.76 percent); and personal expenses (6.72 percent from 7.21 percent). Additional upward pressure came from: Housing and utilities (2.59 percent); recreation and culture (4.68 percent); furnishings and household equipment (2.00 percent); communication (1.68 percent); and education (7.95 percent).

On a monthly basis, consumer prices increased by 0.33 percent, following a 0.38 percent rise in January and less than markets expected. Cost rose at a slower pace for transport (0.24 percent from 0.77 percent in January); while it fell for food (-0.45 percent from 0.35 percent). 


Tuesday March 07 2017
Brazil GDP Shrinks More Than Expected In Q4
IBGE | Joana Taborda | joana.taborda@tradingeconomics.com

The Brazilian economy contracted 0.9 percent on quarter in the last three months of 2016, following a downwardly revised 0.7 percent drop in the previous period and worse than market expectations of a 0.6 percent fall. Household consumption declined at a steeper pace and imports recovered while investment and exports shrank less and government spending edged up.

Household spending fell 0.6 percent, more than a 0.3 percent drop in the previous quarter. In contrast, government spending edged up 0.1 percent, following a 0.4 percent fall in the previous quarter and marking the first increase in nine months. Gross fixed capital formation fell at a slower 1.6 percent (-2.5 percent in Q3) and exports also declined less (-1.8 percent compared to -3.2 percent). On the other hand, imports rose 3.2 percent, recovering from a 3.1 percent decline in the previous period. 

On the production side, the services sector shrank at a faster 0.8 percent (-0.5 percent in Q3) as internal trade fell more (-1.2 percent compared to -0.4 percent) and information services (-2.1 percent compared to 0.3 percent in Q3) and real estate (-0.2 percent compared to a flat reading in Q3) came back to contraction. The industrial sector declined at a slower 0.7 percent, following a 1.4 percent drop in the previous period, dragged down by construction (-2.3 percent compared to -1.7 percent in Q3), manufacturing (-1 percent compared to -1.3 percent in Q3) and electricity output (-0.1 percent compared to -1.2 percent in Q3). In contrast, mining rose 0.7 percent (3.7 percent in Q3) and agriculture went up 1 percent, following a 2.1 percent drop in Q3 and marking the first increase in 2016. 

Year-on-year, the economy slumped 2.5 percent, the eleventh straight quarter of contraction. Considering full 2016, the GDP declined 3.6 percent, following a 3.8 percent deop in 2015, marking the worst recession on record. Agriculture (-6.6 percent compared to +3.6 percent in 2015), industrial production (-3.8 percent compared to -6.3 percent in 2015) and services (-2.7 percent, the same as in 2015) fell. In 2017, markets expect the economy to expand 0.5 percent.