Brazil: Economic activity contracts again in September
Latest reading: Economic activity—a proxy for GDP—was down 0.2% in seasonally adjusted month-on-month terms in September, following 0.4% growth in the prior month. September’s fall was the fourth in five months, slightly faster than markets had anticipated, and further indicated that the economy is decelerating under the pressure of elevated interest rates.
Relative to the prior month’s data, readings in September softened for the industrial sector (-0.7% on a seasonally adjusted month-on-month basis vs +0.8% in August) and the services sector (-0.1% vs +0.2% in August), which accounts for roughly 60% of GDP. In contrast, the reading for the agricultural sector improved in September (+1.5% vs -3.3% in August).
On a year-on-year basis, economic activity was up 2.0% in September, following 0.2% growth in the previous month.
Outlook: September’s result suggests GDP may have declined in the third quarter: Economic activity decreased 0.9% in Q3 from Q2, deteriorating from the prior quarter’s 0.3% rise amid elevated interest rates.
In Q4, our panelists expect GDP to rise only timidly, kept in check by still-elevated borrowing costs.
Looking further ahead to 2026, our Consensus is for GDP growth to slow to a six-year low; agricultural output growth should soften following a bumper harvest in 2025, which, coupled with 50% U.S. tariffs, will likely dampen export growth.
That said, some support will come from solid private consumption and stronger public spending, with pre-poll outlays ahead of the 4 October 2026 general election likely supporting the latter.