Brazil: Slight economic activity growth in August outperforms expectations
Economy beats projections again: The Brazilian economy overshot market expectations again halfway through the third quarter: Economic activity expanded 0.2% month on month in seasonally adjusted terms in August, beating analyst projections of a flat reading. That said, the figure was not strong enough for the economy to recover from the downwardly revised 0.6% contraction seen in the month prior.
On an annual basis, economic activity rose 3.1% in August, decelerating from July’s 5.3% increase. Still, annual average economic activity growth inched up to 2.5% in August from July’s 2.4%, pointing to an improving trend.
Looking at sectoral data, services output—which accounts for roughly 70% of GDP—contracted 0.4% in August (July: +0.2% s.a. mom).
Meanwhile, retail sales also declined, dropping 0.3% in August (July: +0.6% s.a. mom). That said, markets had anticipated a steeper fall. Conversely, in the same month, industrial output improved from the prior month, expanding 0.2% (July: -1.3% s.a. mom), in line with market expectations. In September, growth picked up further to 1.1%.
Panelist insight: Regarding the 2025 outlook, analysts at the EIU commented:
“We expect real GDP growth to slow […] in 2025 as the BCB’s monetary-tightening cycle dampens investment and consumption, and as less generous government spending removes a previous source of support for demand growth. Given Brazil’s heavy debt burden, fiscal policy is the major source of risk to our forecasts.”