Thursday September 19 2019
Brazil Cuts Interest Rate to Fresh Record Low
Banco Central do Brasil | Mario | mario@tradingeconomics.com

The Central Bank of Brazil voted unanimously to trim its key Selic rate by 50bps to 5.50 percent during its September meeting, as widely expected. It is the second consecutive rate cut bringing borrowing costs to its lowest on record, amid the global economic slowdown and as key domestic reforms continue to move forward.

The Committee underscored that data on economic activity since the previous Copom meeting suggest resumption of the process of economic recovery. However, they expect this to occur at a gradual pace, and that risks of a global slowdown persist amid an uncertain outlook. Policymakers emphasizes that risks around its baseline scenario remain in both directions. On the one hand, the high level of economic slack may continue to produce lower-than-expected prospective inflation trajectory. Meanwhile, a possible frustration regarding the continuation of reforms and the perseverance in the necessary adjustments in the economy may affect risk premia and increase the path for inflation over the relevant horizon for the conduct of monetary policy. The Committee added that the decision reflects its baseline scenario for prospective inflation and the associated balance of risks, and it is consistent with convergence of inflation to target over the relevant horizon for the conduct of monetary policy. The Copom sees progress in the process of reforms and necessary adjustments in the economy, but emphasizes that persevering in this process is essential for the reduction of its structural interest rate and for sustainable economic recovery. Policymakers said that concrete progress in the reform agenda is fundamental for the consolidation of the benign scenario for prospective inflation.

The Copom deems that the consolidation of the benign scenario for prospective inflation should permit additional adjustment of the degree of stimulus. The Copom reiterates that communicating this assessment does not restrict its next decision, and emphasizes that the next steps in the conduct of monetary policy will continue to depend on the evolution of economic activity, the balance of risks, and on inflation projections and expectations.

The central bank started its easing cycle in October of 2016 after the inflation rate eased from double digits. The inflation rate finished 2018 within the central bank target of 4.5 percent plus or minus 1.5 percentage points and above 2.95 percent in 2017. It currently remains on target, as the annual inflation rate rose modestly  to 3.43 percent in August (versus 3.22 percent in July). Inflation expectations for 2019, 2020, 2021, and 2022 collected by the Focus survey are around 3.5%, 3.8%, 3.75%, and 3.5%, respectively.

The recovery is still taking longer than initially expected, but the economy gained some steam in the second quarter. GDP expanded 1.0 percent year-on-year in the second quarter of 2019, following a 0.5 percent growth in the previous period and beating market consensus of 0.7 percent. The latest central bank’s Focus survey of market expectations (13 September) pointed slightly higher GDP growth forecasts for 2019, now at 0.87 percent (vs 0.83 percent four weeks ago).




Friday September 06 2019
Brazil Inflation Rate Rises to 3-Month High in August
IBGE | Stefanie Moya | stefanie.moya@tradingeconomics.com

The annual inflation rate in Brazil rose to 3.43 percent in August 2019 from 3.22 percent in the previous month and slightly below market consensus of 3.44 percent. Prices went up further mainly due to cost of transport and housing.

Year-on-year, prices advanced at a faster pace for transport (2.57 percent from 1.72 percent in July); housing (4.27 percent percent from 3.50 percent), namely rents (4.85 percent from 4.57 percent) and electricity (4.96 percent from 2.04 percent); clothing (0.51 percent from 0.48 percent); and communication (0.33 percent from 0.27 percent). On the other hand, cost slowed for food & non-alcoholic beverages (4.12 percent from 4.13 percent); personal expenses (3.52 percent from 3.56 percent); health (3.88 percent from 4.47 percent); and education (4.95 percent from 5.05 percent). Also, inflation was steady for household goods (at 3.28 percent). 

On a monthly basis, consumer prices went up 0.11 percent, easing from a 0.19 percent gain in the prior month and matching market forecasts. Cost of food & non-alcoholic beverages declined 0.35 percent, after increasing 0.01 percent, in particular tomatoes (-24.49 percent), english potato (-9.11 percent) and vegetables (-6.53 percent). In addition, prices dropped further for transport (-0.39 percent from -0.17 percent), namely flight tickets (-15.66 percent) and slowed for housing (1.19 percent from 1.20 percent) personal expenses (0.31 percent from 0.44 percent) and communication (-0.09 percent from 0.57 percent).




Monday September 02 2019
Brazil Trade Surplus Widens in August
MDIC | Stefanie Moya | stefanie.moya@tradingeconomics.com

Brazil's trade surplus widened to USD 3.28 billion in August 2019 from USD 2.77 billion in the corresponding month of the previous year and slightly above market consensus of USD 3.20 billion. Exports declined 12.5 percent over a year earlier and imports dropped at a faster 17.1 percent.

Exports fell 12.5 percent year-on-year to USD 18.85 billion in August, mainly due to lower sales of primary goods (-1.9 percent) and industrial goods (-21.5 percent), of which manufactured products (-29 percent) namely passenger vehicles (-47.7 percent); cargo vehicles (-34.6 percent); engine parts and aviation turbines (-23.7 percent); planes (-23.6 percent) and parts (-21 percent). Meanwhile, sales of semi-manufactured products rose 9.4 percent, in particular  iron (471.5%), ferroalloys (64.3 percent), cast iron (34.9 percent), raw zinc (26.9 percent) and gold (21.1 percent). 

Among major trading partners, exports declined to China (-8.3 percent), the US (-1.5 percent), the EU (-1.5 percent), Argentina (-40.4 percent), and ASEAN countries (-1 percent).

Imports went down 17.1 percent to USD 15.57 billion, due to lower purchases of intermediate (-6.2 percent), capital (-37.8 percent) and consumption goods (-11 percent). In addition exports of fuels & lubricants decreased 36.9 percent. 

Among major trading partners, imports dropped from China (-41.1 percent) and Argentina (-30 percent), but advanced from the EU (1.5 percent) and the US (18.9 percent).

Considering the first seven months of 2019, the country recorded a USD 31.76 billion trade surplus.




Friday August 30 2019
Brazil Unemployment Rate Lower than Expected
IBGE | Joana Ferreira | joana.ferreira@tradingeconomics.com

The unemployment rate in Brazil fell to 11.8 percent in the three months to July 2019 from 12.5 percent in the February to April period, below market consensus of 11.9 percent. The number of unemployed declined by 4.6 percent while employment rose by 1.3 percent. The labor force participation rate increased to 62.1 percent from 61.9 percent in the previous three-month period.

The number of unemployed declined by 609 thousand from the previous period, or 4.6 percent, to 12.569 million.

Employment rose by 1.219 million, or 1.3 percent, to 93.584 million, with most of job gains recorded in public administration, defense, social security and education (+288 thousand); industry (+265 thousand); agriculture, livestock, forestry, fishery and aquaculture (+249 thousand); other services (+216 thousand); domestic services (+132 thousand); construction (+83 thousand); trade (+46 thousand); and information and communication activities, finance, real estate, professional and administrative activities (+21 thousand). Meanwhile, job losses were registered in hotels and restaurants (-25 thousand); and transportation, warehousing and mail (-18 thousand).

The number of people in the labour force went up by 610 thousand to 106.153 million and those detached from the labour force dropped by 129 thousand to 64.822 million.

The average real income was estimated at BRL 2,286 in the three months to July, compared to BRL 2,311 in the three months to April.




Thursday August 29 2019
Brazil Q2 GDP Growth Beats Forecasts
IBGE | Stefanie Moya | stefanie.moya@tradingeconomics.com

The Brazilian economy advanced 0.4 percent on quarter in the three months to June 2019, after a downwardly revised 0.1 percent contraction in the prior period and above market expectations of a 0.2 percent expansion. Growth was mainly boosted by industrial and services activities while agricultural output declined.

On the production side, the industrial sector grew 0.7 percent, rebounding from a 0.5 percent contraction in the first quarter of the year, mainly driven by manufacturing (2.0 percent vs -0.1 percent) and construction (1.9 percent vs -0.5 percent). Also, mining output fell 3.8 percent, slower than a 7.5 percent decrease in Q1 while utilities shrank 0.7 percent after expanding 1.4 percent in the prior quarter. 

The services sector advanced 0.3 percent, higher than a 0.2 percent growth, mostly boosted by trade (0.7 percent vs 0.1 percent), information & communication (0.5 percent vs 0.2 percent) and real estate activities  (0.7 percent vs 0.2 percent). Meantime,  public admininstration, health, social security & education contracted 0.6 percent, after a 0.3 percent increase in the first quarter; financial services continued to shrink (-0.1 percent, the same as Q1) while transportation fell at a softer 0.3 percent (vs -0.6 percent in Q1).

Agriculture contracted 0.4 percent, following a 1.6 percent expansion in the previous period.

On the expenditure side, household spending rose 0.3 percent, the same as in the prior quarter and gross fixed capital formation advanced 3.2 percent, rebounding from a 1.2 percent contraction in the first three months of 2019. On the other hand, government consumption shrank 1 percent, after a 0.5 percent increase. Exports went down 1.6 percent (vs -2.9 percent) while imports increased 1 percent (vs 0.9 percent in Q1).

On a yearly basis, the economy expanded 1.0 percent in the second quarter of 2019, following a 0.5 percent growth in the previous period and also beating market consensus of 0.7 percent. 




Thursday August 29 2019
Brazilian Economy Grows 1% YoY in Q2
IBGE | Stefanie Moya | stefanie.moya@tradingeconomics.com

The Brazilian economy expanded 1.0 percent year-on-year in the second quarter of 2019, following a 0.5 percent growth in the previous period and beating market consensus of 0.7 percent. The services sector continued to grow and agricultural and industrial activities rebounded, as construction output rose for the first time since the first quarter of 2014.

On the production side, services activities advanced 1.2 percent, the same pace as in the first quarter of the year, of which information and communication (3.0 percent vs 3.8 percent), other service activities (1.6 percent vs 1.4 percent), trade (2.1 percent vs 0.5 percent), financial, insurance and related services activities (-0.3 percent vs 0.3 percent), public health, education and social security (-0.1 percent vs 0.5 percent), transport and storage (0.3 percent vs 0.2 percent), and real estate activities (2.7 percent vs 3.0 percent). Additionally, the industrial sector grew 1.2 percent (the same as in Q1), mostly driven by manufacturing (1.6 percent vs -1.7 percent) and construction (2.0 percent vs -2.2 percent). In contrast, mining output dropped 9.4 percent, the sharpest decline on record, after falling 3.0 percent in the prior period and growth slowed in utilities (2.4 percent vs 4.7 percent). Also, agriculture output went up 0.4 percent, rebounding from a 0.1 percent contraction. 

On the expenditure side, household expenditure rose 1.6 percent, higher than a 1.3 percent increase in the frist three months of 2019 and fixed investment jumped 5.2 percent (vs 0.9 percent in Q1). Meanwhile, government spending went down 0.2 percent, after increasing 0.1 percent in the previous quarter.  Exports rose 1.8 percent (vs 1.0 percent in Q1) and imports advanced 4.7 percent (vs -2.5 percent in Q1).

On a quarterly basis, the economy grew 0.4 percent, after shrinking a downwardly revised 0.1 percent in the first three months of the year and also beating market forecasts of a 0.2 percent expansion.




Thursday August 08 2019
Brazil Inflation Rate Dips Further to 3.22% in July
IBGE | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

The annual inflation rate in Brazil fell to 3.22 percent in July 2019 from 3.37 percent in the previous month and below market expectations of 3.28 percent. It was the lowest inflation rate since May last year, as prices slowed mostly for transport and housing.

Year-on-year, prices rose at a softer pace for transport (1.72 percent vs 2.39 percent in June), owing to fuels (-2.85 percent vs -1.85 percent); housing (3.50 percent vs 3.84 percent), namely rents (4.57 percent vs 4.73 percent) and electricity (2.04 percent vs 2.87 percent); health (4.47 percent vs 4.76 percent) and household goods (3.28 percent vs 3.47 percent). In contrast, inflation quickened for food & non-alcoholic beverages (4.13 percent vs 3.99 percent); personal expenses (3.56 percent vs 3.43 percent); clothing (0.48 percent vs 0.39 percent) and education (5.05 percent vs 4.93 percent). Also, prices rebounded for communication (0.27 percent vs -0.21 percent).

On a monthly basis, consumer prices went up 0.19 percent, after rising 0.01 percent in the previous month but lower than market consensus of a 0.24 percent increase. Main upward pressure came from housing (1.20 percent vs 0.07 percent), essentially electricity (4.48 percent vs -1.11 percent), due to the change of the tariff flag, which went from green to yellow, indicating that the energy will cost more, as well as the tariff adjustment in São Paulo, with a large weight in the index. Usually, the color of the flag is printed on the electricity bill (red, yellow or green) and indicates the cost of the energy as a function of electricity generation conditions. Other increases were seen mainly for food & non-alcoholic beverages (0.01 percent vs -0.25 percent), mostly fruit (2.51 percent vs -6.14 percent); personal expenses (0.44 percent vs 0.15 percent) and household goods (0.29 percent vs 0.02 percent).



Friday August 02 2019
Brazil Posts Smallest Trade Surplus for July since 2014
MDIC | Luisa Carvalho | luisa.carvalho@tradingeconomics.com

Brazil's trade surplus decreased to USD 2.29 billion in July 2019 from USD 3.87 billion in the same month of the previous year and below market expectations of a USD 3.8 billion surplus. It is the smallest trade surplus recorded for a July month since 2014, as exports fell much faster than imports.

Exports dipped 11 percent from a year earlier to USD 20.05 billion in July 2019, dragged down by weaker sales of primary goods (-13 percent), mostly soybeans (-31.6 percent); crude oil (-59.4 percent); chicken meat (-8.6 percent); soybean meal (-25.7 percent) and beef (-6.2 percent). Also, shipments fell for manufactured products (-8.3 percent), namely passenger vehicles (-4.4 percent); parts (-12.3 percent); engine parts and aviation turbines (-43.3 percent); cargo vehicles (-30.7 percent) and non-frozen orange juice (-6.8 percent). Sales of semi-manufactured products dropped 0.2 percent, of which pulp (-8.9 percent).

Among major trading partners, exports went down to China (-12.8 percent), ASEAN countries (-48.8 percent), the EU (-16.2 percent) and Argentina (-27.9 percent), but rose significantly to the US (10.7 percent).

Imports declined at a slower 4.8 percent to USD 17.76 billion, mainly due to lower purchases of capital goods (-50.9 percent) and fuels & lubricants (-3.1 percent). In contrast, purchases of intermediate (4.6 percent) and consumption goods (5.6 percent) grew.

Among major trading partners, imports shrank from China (-34.5 percent) and Argentina (-4.6 percent), while they increased from the EU (6.6 percent) and the US (25.2 percent).

Considering the first seven months of 2019, the country's trade surplus narrowed to USD 28.37 billion from USD 33.89 billion in the same period of 2018.



Thursday August 01 2019
Brazil Unexpectedly Cuts Rate by 50 Bps
Mario | mario@tradingeconomics.com

The Central Bank of Brazil voted unanimously to lower its key Selic rate by 50bps to a record low of 6 percent during its July meeting, while markets had forecast a smaller 25bps cut. Policymakers said that the decision is consistent with the convergence of inflation to the target range and will continue to depend on the evolution of economic activity and the inflation outlook.

The Committee underscored that recent data on economic activity indicate weaker economic activity from previous quarters, and that risks of a global slowdown persist. Policymakers also mentioned as main inflationary risks in both directions slack capacity; frustrated expectations over structural reforms, and unfavorable external conditions in emerging markets. They judged that the decision is backed by lower-than-expected inflation and a deteriorated balance of risks since the previous meeting. The Copom reiterated that economic conditions prescribe stimulative monetary policy, i.e., interest rates below the structural level.

The central bank started its easing cycle in October of 2016 after the inflation rate eased from double digits. The inflation rate finished 2018 within the central bank target of 4.5 percent plus or minus 1.5 percentage points and above 2.95 percent in 2017. It currently remains on target, as the annual inflation rate fell markedly to 3.37 percent in June (versus 4.66 percent in May).

The economic recovery is still taking longer than initially expected, with recent negative data. The Brazilian economy shrank 0.2 percent on quarter in the first quarter of 2019, slowing from a 0.1 percent expansion in the previous period and in line with market. It was the first contraction since the last quarter of 2016. Furthermore, the latest central bank’s Focus survey of market expectations (26 July 2019) pointed to lower GDP growth forecasts for 2019, now at 0.82 percent (vs 0.87 percent four weeks ago).


Wednesday July 31 2019
Brazil Jobless Rate Falls to 12% as Expected
IBGE | Joana Ferreira | joana.ferreira@tradingeconomics.com

The unemployment rate in Brazil fell to 12.0 percent in the second quarter of 2019 from 12.7 percent in the January to March period, in line with market consensus.

The number of unemployed declined by 621 thousand from the previous period, or 4.6 percent, to 12.766 million.

Employment rose by 1.479 million, or 1.6 percent, to 93.342 million, with most of job gains recorded in public administration, defense, social security and education (+469 thousand); industry (+319 thousand); agriculture, livestock, forestry, fishery and aquaculture (+233 thousand); domestic services (+151 thousand); other services (+150 thousand); construction (+87 thousand); transportation, warehousing and mail (+72 thousand); and information and communication activities, finance, real estate, professional and administrative activities (+42 thousand). Meanwhile, job losses were registered in trade (-11 thousand); and hotels and restaurants (-7 thousand).

The number of people in the labour force went up by 858 thousand to 106.108 million and those detached from the labour force dropped by 494 thousand to 64.756 million.

The average real income was estimated at BRL 2.290 in the three months to June, compared to BRL 2,321 in the three months to March.