Brazil: Economic activity expands at strongest clip in a year in January
Latest reading: Economic activity—a proxy for GDP—rose 0.8% in seasonally adjusted month-on-month terms in January, following a 0.2% drop in the previous month. January’s reading was the strongest in a year and largely in line with market expectations.
Relative to the previous month’s figures, readings in January improved for the industrial sector (+0.4% in seasonally adjusted month-on-month terms vs 0.0% in December) and the services sector (+0.8% vs -0.1% in December), which is about 60% of GDP. In contrast, the reading for the agricultural sector softened in January (-1.5% vs +2.1% in December).
In annual terms, economic activity rose 1.0% in January, following a 3.0% increase in the prior month.
Outlook: Our Consensus is for sequential GDP growth to have accelerated to the strongest in a year in Q1 2026, with available data supporting this projection: Economic activity growth in January was stronger than that recorded in Q4 2025.
Sequential GDP growth is then set to slow from Q1 to Q2, before broadly stabilizing through the end of 2026. Overall this year, the economy is set to grow at the mildest pace since the pandemic-induced downturn in 2020. Key factors to monitor are changes in U.S. tariffs, domestic fiscal policy ahead of the October general elections, and spillovers from the war in Iran and its impact on domestic inflation, interest rates and supply chains.
Panelist insight: Regarding the economy’s performance in H1 vs H2 this year, analysts at the EIU added:
“Expansionary fiscal and quasi-fiscal measures that took effect in January—including minimum-wage increases and a higher tax threshold for lower-income households—will cause growth to accelerate in the first half of the year before the initial stimulus begins to fade.”