(Bloomberg) — Brazil’s economy expanded much more than expected in the second quarter, propelled by gains in services and industry despite the drag from double-digit interest rates.
(Bloomberg) — Brazil’s economy expanded much more than expected in the second quarter, propelled by gains in services and industry despite the drag from double-digit interest rates.
Official data released Friday showed gross domestic product expanded 0.9% in the April-June period from the previous quarter, above all but one forecast in a Bloomberg survey of analysts that had a 0.3% median estimate.
From a year ago, the economy grew 3.4%.
A robust labor market and strong services have helped deliver back-to-back quarters of growth and vastly improved the political fortunes of President Luiz Inacio Lula da Silva.
At the start of the year, a wobbly economy seemed to imperil his plans to fight poverty and push through sweeping reforms.
The leftist leader’s approval rating hit 60% in August, according to pollster Quaest.
Analysts caution, however, that elevated interest rates are likely to sap momentum from Latin America’s largest economy in the coming months.
What Bloomberg Economics Says
“Strong, broad-based GDP growth in the second quarter underscores the momentum in Brazil.
The outsize print adds a strong upside bias to the analyst consensus estimate for 2023 growth. However, it may reinforce the central bank’s concern on the level of economic slack. We think the BCB will still proceed with rate cuts, but it’s less likely to accelerate the pace.”
— Adriana Dupita, Brazil and Argentina economist
Click here for the full report.
In the second quarter, industry gained 0.9% while services grew 0.6%, representing the major drivers of the period.
Agriculture fell 0.9% after a surge at the start of the year.
Swap rates climbed across the curve after the release of the GDP data. Contracts due in January 2025, which indicate market sentiment about monetary policy at the end of next year, rose more than four basis points in morning trading.
–With assistance from Giovanna Serafim.
(Updates with details from survey in second paragraph, market move in sixth paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
