Brazil: Economic activity shrinks again in October
Latest reading: Economic activity—a proxy for GDP—was down 0.2% in seasonally adjusted month-on-month terms in October, stable from the previous month’s reading. October’s fall is the fifth in six months, and missed analysts’ expectations of a slight rise. The result provides further proof that the impact of high interest rates is trickling down to the economy and cooling activity.
Relative to the prior month’s data, the reading for the agricultural sector improved in October (+3.1% in seasonally adjusted month-on-month terms vs +1.9% in September). In contrast, the reading for the services sector—roughly 60% of GDP—softened (-0.2% vs 0.0% in September). Finally, the variation in the industrial sector was the same as in the prior month (-0.7% in October and September).
In annual terms, economic activity was up 0.4% in October, following an upwardly revised 2.2% growth in the previous month.
Outlook: Our Consensus is for quarter-on-quarter GDP growth to decelerate from Q3’s weak rate and roughly flatline in Q4. The Central Bank has kept borrowing costs at their highest level in nearly two decades since June, with household consumption beginning to feel the impact—despite a hot labor market—amid elevated debt levels.