Labor Costs Expected to Outpace Inflation in Brazil, Survey Shows

The Brazilian Central Bank has released its second Firmus survey, revealing shifting economic perspectives among non-financial businesses.

The survey, conducted in August 2024, gathered insights from 95 companies, offering a glimpse into their economic outlook and business expectations.

Inflation projections for 2024 have risen since the previous survey. Business leaders now anticipate a 4.20% inflation rate, up from their earlier 4.00% forecast.

This new estimate aligns closely with the Focus bulletin’s projection of 4.26% from financial institutions. For 2025, companies maintained their inflation forecast at 4.00%.

Looking further ahead to 2026, they slightly lowered their prediction to 3.60%, down from 3.70% in the May survey. The survey also shed light on GDP growth expectations.

Businesses now project a 2.20% increase for the current year, up from their previous 2.00% estimate. This figure, however, remains below the Focus bulletin’s 2.46% prediction.

Labor costs are becoming a growing concern for many companies. The survey found that 66.3% of respondents expect labor costs to rise by more than 4% over the next year. This marks an increase from 59.7% in the May survey.

Changing Economic Perspectives Among Brazilian Companies

Interestingly, fewer companies now anticipate wage increases in line with the 3% inflation target. The percentage dropped from 34.8% to 29.5%, suggesting a shift in labor cost expectations.

The Central Bank noted an improved perception of the current economic situation among surveyed companies. Many businesses expect growth in their primary sectors to match or exceed the country’s overall GDP growth.

However, the survey also revealed a trend towards higher product pricing. More companies are planning to adjust their prices in line with or slightly above inflation rates.

This Firmus survey provides valuable insights into the economic perspectives of non-financial businesses in Brazil.

It highlights changing views on inflation, GDP growth, and labor costs, offering a comprehensive picture of the business landscape.