Brazil: IBC-Br is almost stable in September, but points to growth in the 3rd quarter

The Brazilian economy was practically stable in September, with a much weaker result than expected, but still ended the third quarter with expansion, according to data from the Central Bank.

The Central Bank’s Economic Activity Index (IBC-Br) registered a positive change of 0.05% in September compared to the previous month, according to the seasonally adjusted data of the indicator, which is a GDP indicator.

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The result is back in the blue after having contracted 1.13% in August, in a data that was not reviewed by the BC, but was well below the expectation in a Reuters survey of a high of 0.20%.

Even so, the IBC-Br ended the third quarter with a growth of 1.36% in relation to the previous three months, after an expansion of 0.69% in the second quarter.

The IBGE will release official GDP data for the third quarter on December 1, after reporting that the economy grew by 1.2% in the second quarter.

In comparison with September of the previous year, the IBC-Br had a high of 4.00%, while in the accumulated in 12 months it increased by 2.34%, according to observed numbers.

In September, Brazilian industrial production fell again, at a rate of 0.7%, and ended the third quarter with a loss of rhythm.

On the other hand, retail sales in Brazil grew much more than expected in the month, 1.1%, but still ended the third quarter with losses.

The service sector, the main driver of the Brazilian economy, saw the volume increase for the fifth time in a row in September and above expectations, reaching the best level of the historical series started in 2011.

However, the expectation for the end of this year is for the economy to weaken, even in the face of fiscal stimulus, as the lagged effects of the strong monetary tightening adopted by the Central Bank begin to appear.

“The reduction in returns from the dynamics of reopening the economy, the tightening of monetary and financial conditions, high levels of household indebtedness and the incipient turn in the credit cycle should create obstacles for service activity at the end of 2022 and the first half of 2022. 2023”, evaluated Alberto Ramos, from Goldman Sachs.

With inflation weighing on consumers’ pockets this year, the BC raised the basic Selic interest rate to the current 13.75%, a level at which it should end 2022.

One of the big concerns involves the extra-ceiling spending plans for Luiz Inácio Lula da Silva’s third term as president. Investors are waiting for the text of the Transition PEC (Proposal for Amendment to the Constitution) to be defined to allow for extra-ceiling spending in 2023.

The Focus survey carried out weekly by the BC with a hundred economists points out that GDP is expected to grow 2.77% this year, slowing to an expansion of 0.70% in 2023.

With information from Forbes