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Friday July 07 2017 Brazil Inflation Rate Falls Further To 3% IBGE \| Joana Taborda \| joana.taborda@tradingeconomics.com Consumer prices in Brazil increased 3 percent year-on-year in June of 2017, below 3.6 percent in May and in line with market expectations of 3.06 percent. It is the lowest inflation rate since April of 2007, due to a slowdown in cost of food and a fall in electricity prices. Prices rose at a slower pace for: food and beverages (1.13 percent from 2.36 percent in May); housing and utilities (2.62 percent from 4.07 percent); health (7.44 percent from 7.84 percent) and clothing (2.24 percent from 2.35 percent). In addition, prices fell for furnishings; household equipment (-0.72 percent from -0.4 percent). On the other hand, inflation was steady for transport (1.85 percent from 1.84 percent) and education (8 percent from 8.04 percent) and increased for personal expenses (7.44 percent from 5.32 percent). On a monthly basis, consumer prices fell 0.23 percent, the first monthly decline since November of 1998. Prices went down 0.77 percent for housing, due to a 5.52 percent drop in electricity cost amid adjustments in energy fees. Transport prices dropped 0.52 percent, due to a 2.65 percent fall in gas prices. Additional downward pressure came from cost of food and beverages (-0.5 percent).
Monday July 03 2017 Brazil Trade Surplus Widens In June Yekaterina Guchshina \| yekaterina@tradingeconomics.com Brazil posted a USD 7.2 billion trade surplus in June of 2017, higher than a USD 3.9 billion surplus a year earlier and above market expectations of USD 6.9 billion. In the first six months of the year, trade surplus widened by 53.1 percent to USD 36.2 billion, as exports went up 19.3 percent and imports rose at a slower 7.3 percent. Exports from Brazil jumped 23.9 percent year-on-year to USD 19,788 million in June of 2017, boosted by sales of semimanufactured products (28.2 percent), namely iron and steel (75.6 percent), sugar (46.4 percent), pulp (45.1 percent), sawn wood (16.1 percent) and leather (3.5 percent); basic products including corn (by USD 4 million), crude oil (114.1 percent), copper (13.1 percent), iron ore (32.2 percent), coffee beans (6.8 percent) and soybeans (18.2 percent). Also, shipments of manufactured products went up 16.1 percent, namely steel and iron pipes (86.6 percent) and cars (69.5 percent). Considering the first six months of the year, exports went up 19.3 percent to USD 107.714 billion. Higher prices for iron ore (82.7 percent), oil (128.2 percent), soy (20 percent), cargo vehicles (59.2 percent) and automobiles (32 percent) were the main drivers of the increase. Exports rose to Central America and the Caribbean (34.5 percent), Africa (52.4 percent), the US (21.6 percent), the Middle East (43.7 percent), Mercosul (27.1 percent) and Asia (22.9 percent out of which those to China gained 24.3 percent). Imports increased at a slower 3.3 percent to USD 12,593 million. Purchases rose for fuels and lubricants (62.4 percent), consumer goods (7.6 percent) and intermediate goods (13.6 percent) but fell for capital goods (-50.5 percent).
Friday June 30 2017 Brazil Unemployment Rate Lower Than Expected At 13.3% IBGE \| Joana Taborda \| joana.taborda@tradingeconomics.com The jobless rate in Brazil came in at 13.3 percent in the quarter ended May of 2017, well below market expectations of 13.8 percent. The jobless rate declined for the second consecutive period after reaching a record high of 13.7 percent in the first quarter of the year. In the the December-February period, the jobless rate was slightly lower at 13.2 percent. Compared with the December-February period, the number of unemployed increased by 1.7 percent to 13.77 million in the three months to May; employment rose at a slower 0.4 percent to 89.687 million and those detached form the labour force decreased by 0.2 percent to 64.412 million. Employment rose in the industrial sector (3 percent to 11.66 million), accomomdation and food (2.9 percent to 5.1 million), other services (2.3 percent to 4.383 million) and domestic services (1.3 percent nto 6.163 million). In contrast, job losses were mainly seen in trade (-0.9 percent to 17.28 million); information, financial and real estate activities (-0.1 percent to 9.834 million); construction (-3.9 percent to 6.674 million), agriculture (-1.6 percent to 8.675 million) and transportation (-0.9 percent to 4.53 million).
Friday June 09 2017 Brazil Inflation Rate Down To 10-Year Low Of 3.6% IBGE \| Joana Taborda \| joana.taborda@tradingeconomics.com Consumer prices in Brazil increased 3.6 percent year-on-year in May of 2017, following a 4.08 percent rise in April and below market expectations of 3.77 percent. The inflation slowed for the ninth straight month to the lowest since May of 2007. Inflation for food and beverages was the smallest since January of 2007 while prices increased more for housing and utilities, transport and clothing. Prices rose at a slower pace for: food and beverages (2.36 percent from 3.51 percent in April); health (7.84 percent from 8.91 percent); personal expenses (5.32 percent from 6.5 percent) and education (8.04 percent from 8.12 percent). In addition, prices fell for furnishings; household equipment (-0.4 percent from 0.46 percent). On the other hand, cost increased more for housing and utilities (4.07 percent from 3.72 percent); transport (1.84 percent from 1.68 percent) and clothing (2.35 percent from 2.28 percent). On a monthly basis, consumer prices increased 0.31 percent, higher than 0.14 percent in April, mainly due to an 8.98 percent jump in electricity cost. In April, electricity prices fell 6.39 percent after discounts were made in order to compensate consumers for improper collection in 2016.
Thursday June 01 2017 Brazil Trade Surplus Hits Record High In May Joana Taborda \| joana.taborda@tradingeconomics.com Brazil posted a USD 7,661 million trade surplus in May of 2017, 19 percent higher than a USD 6,437 million surplus a year earlier and in line with market expectations. It is the highest surplus ever, amid record harvest of soy. Exports jumped 12.6 percent year-on-year to USD 19,792 million, boosted by sales of semimanufactured products (16.4 percent), namely iron and steel (63.7 percent), sugar (46 percent), pulp (29 percent), sawn wood (22.5 percent) and leather (3.5 percent); basic products including corn (922.3 percent), crude oil (94.2 percent), copper (62.5 percent), iron ore (17.5 percent), coffee beans (2 percent) and soybeans (7.7 percent). In contrast, shipments of manufactured products declined 1.2 percent, namely electric motors and generators (-22.5 percent) and plastic polymers (-4.4 percent). Exports rose to Central America and the Caribbean (36.8 percent), Africa (23.9 percent), the US (21.6 percent), the Middle East (18.2 percent), Mercosul (16.8 percent) and Asia (16.2 percent out of which those to China gained 10.2 percent). Imports increased at a slower 9 percent to USD 12,131 million. Purchases rose for fuels and lubricants (30.2 percent), consumer goods (20.2 percent) and intermediate goods (1.5 percent) but fell for capital goods (-20.7 percent). Considering the first five months of the year, exports went up 18.5 percent to USD 87.932 billion. Higher prices for iron ore (94.1 percent), oil (68 percent), soy (8 percent), cargo vehicles (5 percent) and automobiles (1.8 percent) were the main drivers of the increase while in volume terms, sales declined 0.8 percent. Imports increased 8.4 percent to USD 58.9 billion, bringing the country’s trade surplus to USD 29 billion, the highest on record for the period.
Thursday June 01 2017 Brazil GDP Shrinks The Least In 2 Years In Q1 Joana Taborda \| joana.taborda@tradingeconomics.com The Brazilian economy contracted 0.4 percent year-on-year in the first three months of 2017, following a 2.5 percent drop in the previous period and better than market expectations of a 0.5 percent fall. It is the 12th straight quarter of contraction but at the slowest pace in 2 years as the drag from consumer spending and investment was smaller. Consumer spending (-1.9 percent from -2.9 percent in Q4) and gross fixed capital formation (-3.7 percent from -5.4 percent) fell less. In contrast, public expenditure went down at a faster 1.3 percent (-0.1 percent in Q4) as the government of Michel Temer reduced fiscal spending. Exports went up 1.9 percent, following a 7.6 percent slump in Q1 as sales rose for oil, iron ore and soybeans. After declining for two years, imports jumped 9.8 percent, the most since the third quarter of 2013. On a quarterly basis, the economy advanced 1 percent following a downwardly revised 0.5 percent drop in the previous period and in line with market expectations. It is the first expansion in 2 years, boosted by a jump in exports and a smaller drag from consumer spending.
Thursday June 01 2017 Brazil GDP Returns To Growth In Q1 Joana Taborda \| joana.taborda@tradingeconomics.com The Brazilian economy advanced 1 percent on quarter in the first three months of 2017, following a downwardly revised 0.5 percent drop in the previous period and in line with market expectations. It is the first expansion after a 2-year recession, boosted by a jump in exports and a smaller drag from consumer spending. On the other hand, public spending fell and investment continued to shrink. Exports jumped 4.8 percent (-1 percent in Q4), the most in 2 years, after four straight quarters of declines as sales of oil, iron ore and soybeans grew. Imports increased 1.8 percent, slowing from a 3.5 percent rise in Q4. Consumer spending edged down 0.1 percent (-0.5 percent in Q4), dropping the least in nine quarters. On the other hand, gross fixed capital formation went down 1.6 percent, the same as in the previous period, contracting for a third straight quarter as investors remain cautious amid continued political scandals and higher borrowing cost. Also, government spending fell 0.6 percent, the most since Q4 of 2015, after a flat reading in the previous period as the government of Michel Temer reduced fiscal spending. On the production side, agriculture grew 13.4 percent recovering from 0.2 percent contraction in Q4 amid record harvest. Also, industry rebounded (0.9 percent from -0.9 percent in Q4). Still, services were flat, with retail trade falling 0.6 percent (-1.1 percent in Q4). Year-on-year, the economy contracted 0.4 percent, the least in two years.
Wednesday May 31 2017 Brazil Cuts Key Interest Rate To 3-1/2-Year Low Of 10.25% Mario \| mario@tradingeconomics.com The Central Bank of Brazil unanimously cut its key Selic rate by 100 basis points to 10.25 percent on May 31st of 2017, as widely anticipated. It is the sixth straight rate decline, bringing borrowing costs to the lowest since December of 2013 amid slowing inflation and a sticky contraction. It follows a 100 bps cut in the April 12th of 2017 meeting. The statement underscored that inflation developments remain favorable; that inflation expectations for 2017 fell to around 4.0 percent; and that the Copom views the heightened uncertainty regarding the speed of the process of reforms and adjustments in the Brazilian economy as the main risk factor. The Committee also mentioned that a softer pace of monetary easing relative to the 100 bps cut of the May 31st meeting is likely to be appropriate at its next meeting. The central bank started its easing cycle in October last year after the inflation rate eased from double digits. Inflation slowed faster than expected in the past seven months due to subdued economic activity and a stronger real. Consumer prices in Brazil increased 4.08 percent year-on-year in April of 2017, following a 4.57 percent rise in March and in line with market expectations of 4.1 percent. The inflation rate slowed for the eighth straight month to the lowest since July of 2007, standing below the central bank target of 4.5 percent for the first time since December of 2009. Still, the economic recovery could take even longer than initially expected: Brazil’s industrial production expanded only 1.1 percent year-on-year in February, compared to expectations of a 2.1 percent rise. Consumer confidence declined to 100.6 in May of 2017 from 103.4 in the previous month. Political uncertainty coming from President Temer’s involvement in Lava Jato could explain the decline. On the positive side, the manufacturing PMI increased to 50.1 in April of 2017 from 49.6 in March, beating market expectations of 49.8. The reading pointed to the first expansion in factory activity since January of 2015. The median estimate in a central bank poll of economists currently points to growth of 0.49 percent in 2017 and 2.48 percent in 2018. Analysts expect the Selic rate to end 2017 at 8.50 percent (unchanged compared to 4 weeks ago).
Wednesday May 31 2017 Brazil Unemployment Rate Lower Than Expected In Feb-Apr IBGE \| Joana Ferreira \| joana.ferreira@tradingeconomics.com The jobless rate in Brazil rose to 13.6 percent in the quarter ended April 2017 from 12.6 percent in the three months to January, better than market expectations of 13.9 percent. The number of unemployed jumped by 8.7 percent to 14.0 million people while employment fell by 0.7 percent to 89.2 million. Compared with the November-January period, the number of unemployed persons jumped 8.7 percent, or by 1.1 million, to 14.0 million. Employment fell by 0.7 percent, or by 615 thousand, to 89.2 million, with job losses in agriculture, livestock, forestry, fishing and aquaculture (-2.4 percent), construction (-4.1 percent) and trade, repair of motor vehicles and motorcycles (-2.6 percent). By contrast, there were increases in industry (1.8 percent) and accomomdation and food (3 percent). People attached to the labour force, that is, either employed or unemployed but actively seeking for job rose by 0.5 percent to 103.3 million. Those detached from the labour force dropped by 0.3 percent to 64.4 million. Compared with the same period a year earlier, the number of unemployed people surged 23.1 percent while employment dropped 1.5 percent. The average real income (BRL 2,107) in the quarter ended April 2017 remained stable compared to the previous quarter (BRL 2,095) and also in relation to the same quarter of 2016 (BRL 2,052).
Thursday June 01 2017 Brazilian Economy Looks to Set For Recovery Joana Taborda \| joana.taborda@tradingeconomics.com Brazilian economy expanded for the first time in two years in the March 2017 quarter and recent data points to recovery in private investment and production. However, sustained growth is heavily dependent on the government ability to pass fiscal reforms, reduce fiscal imbalances and restore consumer and business confidence which may be very difficult to achieve as President Tamer has been recently implicated in the corruption scandal. The GDP grew 1 percent on quarter in the first three months of 2017, due to a jump in exports of oil, iron ore and soybeans and a smaller drag from consumer spending. On the production side, record harvest boost agriculture. On the negative side, public spending fell and investment continued to shrink while the services sector were flat. The Industrial Entrepreneur Confidence Index has been recovering since the beginning of 2017 after reaching a record low of 36 in December of 2015. The index reached 53.7 in May, staying above 50 for the fifth consecutive month as managers remain confident in the future amid lower interest rates, fiscal reforms and business-friendly measures the government intends to implement. The manufacturing PMI rose to 52 in May, pointing to the strongest expansion in factory activity since February of 2013. In addition, the services PMI went up to 50.3 in April, the first expansion since February of 2015. The inflation rate eased for the eighth straight month to 4.08 percent in April, the lowest since July of 2007, falling below the central bank target of 4.5 percent for the first time since December of 2009. The inflation has been slowing faster than anticipated as the real strengthened, prompting the central bank to ease monetary policy. The benchmark Selic rate was already cut by 400bps since October last year, standing at 10.25 percent and is expected to reach 8.5 percent by the end of 2017. On the negative side, the unemployment has been rising rapidly, breaking record highs and reaching 13.7 percent in March. The economy shed 1.371 million jobs in 2016, following a 1.625 million loss in 2015, bringing employment to 5-year lows and hurting household spending. As a result consumer spending has been weak: retail sales fell 4 percent year-on-year in March of 2017, marking the 24th straight month of decline. The jobless rate is expected to continue to rise during 2017 before starting to fall in 2018 as the economy recovers. The fiscal deficit was recorded at 8.9 percent in 2016 after reaching a record high of 10.2 percent in 2015 amid falling revenues, several tax exemptions and higher expenditure. The rapid deterioration of the country's finances has significantly raised the country's debt burden, leading to a gross debt of 69.5 percent of the GDP in 2016, higher than 65.5 percent in 2015. The government of Michel Temer already passed a fiscal cap amendment that limits the growth of federal government spending to the rate of inflation for 20 years. It also intends to pass several other reforms including a rise in retirement age, cuts in pensions and social benefits in an attempt to restore fiscal balance and confidence. However, such measures are expected to face strong political opposition.

Friday July 07 2017
Brazil Inflation Rate Falls Further To 3%
IBGE | Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in Brazil increased 3 percent year-on-year in June of 2017, below 3.6 percent in May and in line with market expectations of 3.06 percent. It is the lowest inflation rate since April of 2007, due to a slowdown in cost of food and a fall in electricity prices.

Prices rose at a slower pace for: food and beverages (1.13 percent from 2.36 percent in May); housing and utilities (2.62 percent from 4.07 percent); health (7.44 percent from 7.84 percent) and clothing (2.24 percent from 2.35 percent). In addition, prices fell for furnishings; household equipment (-0.72 percent from -0.4 percent). On the other hand, inflation was steady for transport (1.85 percent from 1.84 percent) and education (8 percent from 8.04 percent) and increased for personal expenses (7.44 percent from 5.32 percent).

On a monthly basis, consumer prices fell 0.23 percent, the first monthly decline since November of 1998. Prices went down 0.77 percent for housing, due to a 5.52 percent drop in electricity cost amid adjustments in energy fees. Transport prices dropped 0.52 percent, due to a 2.65 percent fall in gas prices. Additional downward pressure came from cost of food and beverages (-0.5 percent).

Monday July 03 2017
Brazil Trade Surplus Widens In June
Yekaterina Guchshina | yekaterina@tradingeconomics.com

Brazil posted a USD 7.2 billion trade surplus in June of 2017, higher than a USD 3.9 billion surplus a year earlier and above market expectations of USD 6.9 billion. In the first six months of the year, trade surplus widened by 53.1 percent to USD 36.2 billion, as exports went up 19.3 percent and imports rose at a slower 7.3 percent.

Exports from Brazil jumped 23.9 percent year-on-year to USD 19,788 million in June of 2017, boosted by sales of semimanufactured products (28.2 percent), namely iron and steel (75.6 percent), sugar (46.4 percent), pulp (45.1 percent), sawn wood (16.1 percent) and leather (3.5 percent); basic products including corn (by USD 4 million), crude oil (114.1 percent), copper (13.1 percent), iron ore (32.2 percent), coffee beans (6.8 percent) and soybeans (18.2 percent). Also, shipments of manufactured products went up 16.1 percent, namely steel and iron pipes (86.6 percent) and cars (69.5 percent). Considering the first six months of the year, exports went up 19.3 percent to USD 107.714 billion. Higher prices for iron ore (82.7 percent), oil (128.2 percent), soy (20 percent), cargo vehicles (59.2 percent) and automobiles (32 percent) were the main drivers of the increase.

Exports rose to Central America and the Caribbean (34.5 percent), Africa (52.4 percent), the US (21.6 percent), the Middle East (43.7 percent), Mercosul (27.1 percent) and Asia (22.9 percent out of which those to China gained 24.3 percent).

Imports increased at a slower 3.3 percent to USD 12,593 million. Purchases rose for fuels and lubricants (62.4 percent), consumer goods (7.6 percent) and intermediate goods (13.6 percent) but fell for capital goods (-50.5 percent).

Friday June 30 2017
Brazil Unemployment Rate Lower Than Expected At 13.3%
IBGE | Joana Taborda | joana.taborda@tradingeconomics.com

The jobless rate in Brazil came in at 13.3 percent in the quarter ended May of 2017, well below market expectations of 13.8 percent. The jobless rate declined for the second consecutive period after reaching a record high of 13.7 percent in the first quarter of the year.

In the the December-February period, the jobless rate was slightly lower at 13.2 percent. Compared with the December-February period, the number of unemployed increased by 1.7 percent to 13.77 million in the three months to May; employment rose at a slower 0.4 percent to 89.687 million and those detached form the labour force decreased by 0.2 percent to 64.412 million.

Employment rose in the industrial sector (3 percent to 11.66 million), accomomdation and food (2.9 percent to 5.1 million), other services (2.3 percent to 4.383 million) and domestic services (1.3 percent nto 6.163 million). In contrast, job losses were mainly seen in trade (-0.9 percent to 17.28 million); information, financial and real estate activities (-0.1 percent to 9.834 million); construction (-3.9 percent to 6.674 million), agriculture (-1.6 percent to 8.675 million) and transportation (-0.9 percent to 4.53 million).

Friday June 09 2017
Brazil Inflation Rate Down To 10-Year Low Of 3.6%
IBGE | Joana Taborda | joana.taborda@tradingeconomics.com

Consumer prices in Brazil increased 3.6 percent year-on-year in May of 2017, following a 4.08 percent rise in April and below market expectations of 3.77 percent. The inflation slowed for the ninth straight month to the lowest since May of 2007. Inflation for food and beverages was the smallest since January of 2007 while prices increased more for housing and utilities, transport and clothing.

Prices rose at a slower pace for: food and beverages (2.36 percent from 3.51 percent in April); health (7.84 percent from 8.91 percent); personal expenses (5.32 percent from 6.5 percent) and education (8.04 percent from 8.12 percent). In addition, prices fell for furnishings; household equipment (-0.4 percent from 0.46 percent). On the other hand, cost increased more for housing and utilities (4.07 percent from 3.72 percent); transport (1.84 percent from 1.68 percent) and clothing (2.35 percent from 2.28 percent).

On a monthly basis, consumer prices increased 0.31 percent, higher than 0.14 percent in April, mainly due to an 8.98 percent jump in electricity cost. In April, electricity prices fell 6.39 percent after discounts were made in order to compensate consumers for improper collection in 2016.

Thursday June 01 2017
Brazil Trade Surplus Hits Record High In May
Joana Taborda | joana.taborda@tradingeconomics.com

Brazil posted a USD 7,661 million trade surplus in May of 2017, 19 percent higher than a USD 6,437 million surplus a year earlier and in line with market expectations. It is the highest surplus ever, amid record harvest of soy.

Exports jumped 12.6 percent year-on-year to USD 19,792 million, boosted by sales of semimanufactured products (16.4 percent), namely iron and steel (63.7 percent), sugar (46 percent), pulp (29 percent), sawn wood (22.5 percent) and leather (3.5 percent); basic products including corn (922.3 percent), crude oil (94.2 percent), copper (62.5 percent), iron ore (17.5 percent), coffee beans (2 percent) and soybeans (7.7 percent). In contrast, shipments of manufactured products declined 1.2 percent, namely electric motors and generators (-22.5 percent) and plastic polymers (-4.4 percent).

Exports rose to Central America and the Caribbean (36.8 percent), Africa (23.9 percent), the US (21.6 percent), the Middle East (18.2 percent), Mercosul (16.8 percent) and Asia (16.2 percent out of which those to China gained 10.2 percent).

Imports increased at a slower 9 percent to USD 12,131 million. Purchases rose for fuels and lubricants (30.2 percent), consumer goods (20.2 percent) and intermediate goods (1.5 percent) but fell for capital goods (-20.7 percent).

Considering the first five months of the year, exports went up 18.5 percent to USD 87.932 billion. Higher prices for iron ore (94.1 percent), oil (68 percent), soy (8 percent), cargo vehicles (5 percent) and automobiles (1.8 percent) were the main drivers of the increase while in volume terms, sales declined 0.8 percent. Imports increased 8.4 percent to USD 58.9 billion, bringing the country’s trade surplus to USD 29 billion, the highest on record for the period.

Thursday June 01 2017
Brazil GDP Shrinks The Least In 2 Years In Q1
Joana Taborda | joana.taborda@tradingeconomics.com

The Brazilian economy contracted 0.4 percent year-on-year in the first three months of 2017, following a 2.5 percent drop in the previous period and better than market expectations of a 0.5 percent fall. It is the 12th straight quarter of contraction but at the slowest pace in 2 years as the drag from consumer spending and investment was smaller.

Consumer spending (-1.9 percent from -2.9 percent in Q4) and gross fixed capital formation (-3.7 percent from -5.4 percent) fell less. In contrast, public expenditure went down at a faster 1.3 percent (-0.1 percent in Q4) as the government of Michel Temer reduced fiscal spending. Exports went up 1.9 percent, following a 7.6 percent slump in Q1 as sales rose for oil, iron ore and soybeans. After declining for two years, imports jumped 9.8 percent, the most since the third quarter of 2013.

On a quarterly basis, the economy advanced 1 percent following a downwardly revised 0.5 percent drop in the previous period and in line with market expectations. It is the first expansion in 2 years, boosted by a jump in exports and a smaller drag from consumer spending.

Thursday June 01 2017
Brazil GDP Returns To Growth In Q1
Joana Taborda | joana.taborda@tradingeconomics.com

The Brazilian economy advanced 1 percent on quarter in the first three months of 2017, following a downwardly revised 0.5 percent drop in the previous period and in line with market expectations. It is the first expansion after a 2-year recession, boosted by a jump in exports and a smaller drag from consumer spending. On the other hand, public spending fell and investment continued to shrink.

Exports jumped 4.8 percent (-1 percent in Q4), the most in 2 years, after four straight quarters of declines as sales of oil, iron ore and soybeans grew. Imports increased 1.8 percent, slowing from a 3.5 percent rise in Q4. Consumer spending edged down 0.1 percent (-0.5 percent in Q4), dropping the least in nine quarters. On the other hand, gross fixed capital formation went down 1.6 percent, the same as in the previous period, contracting for a third straight quarter as investors remain cautious amid continued political scandals and higher borrowing cost. Also, government spending fell 0.6 percent, the most since Q4 of 2015, after a flat reading in the previous period as the government of Michel Temer reduced fiscal spending.

On the production side, agriculture grew 13.4 percent recovering from 0.2 percent contraction in Q4 amid record harvest. Also, industry rebounded (0.9 percent from -0.9 percent in Q4). Still, services were flat, with retail trade falling 0.6 percent (-1.1 percent in Q4).

Year-on-year, the economy contracted 0.4 percent, the least in two years.

Wednesday May 31 2017
Brazil Cuts Key Interest Rate To 3-1/2-Year Low Of 10.25%
Mario | mario@tradingeconomics.com

The Central Bank of Brazil unanimously cut its key Selic rate by 100 basis points to 10.25 percent on May 31st of 2017, as widely anticipated. It is the sixth straight rate decline, bringing borrowing costs to the lowest since December of 2013 amid slowing inflation and a sticky contraction. It follows a 100 bps cut in the April 12th of 2017 meeting.

The statement underscored that inflation developments remain favorable; that inflation expectations for 2017 fell to around 4.0 percent; and that the Copom views the heightened uncertainty regarding the speed of the process of reforms and adjustments in the Brazilian economy as the main risk factor. The Committee also mentioned that a softer pace of monetary easing relative to the 100 bps cut of the May 31st meeting is likely to be appropriate at its next meeting.

The central bank started its easing cycle in October last year after the inflation rate eased from double digits. Inflation slowed faster than expected in the past seven months due to subdued economic activity and a stronger real. Consumer prices in Brazil increased 4.08 percent year-on-year in April of 2017, following a 4.57 percent rise in March and in line with market expectations of 4.1 percent. The inflation rate slowed for the eighth straight month to the lowest since July of 2007, standing below the central bank target of 4.5 percent for the first time since December of 2009.

Still, the economic recovery could take even longer than initially expected: Brazil’s industrial production expanded only 1.1 percent year-on-year in February, compared to expectations of a 2.1 percent rise. Consumer confidence declined to 100.6 in May of 2017 from 103.4 in the previous month. Political uncertainty coming from President Temer’s involvement in Lava Jato could explain the decline. On the positive side, the manufacturing PMI increased to 50.1 in April of 2017 from 49.6 in March, beating market expectations of 49.8. The reading pointed to the first expansion in factory activity since January of 2015. The median estimate in a central bank poll of economists currently points to growth of 0.49 percent in 2017 and 2.48 percent in 2018. Analysts expect the Selic rate to end 2017 at 8.50 percent (unchanged compared to 4 weeks ago).

Wednesday May 31 2017
Brazil Unemployment Rate Lower Than Expected In Feb-Apr
IBGE | Joana Ferreira | joana.ferreira@tradingeconomics.com

The jobless rate in Brazil rose to 13.6 percent in the quarter ended April 2017 from 12.6 percent in the three months to January, better than market expectations of 13.9 percent. The number of unemployed jumped by 8.7 percent to 14.0 million people while employment fell by 0.7 percent to 89.2 million.

Compared with the November-January period, the number of unemployed persons jumped 8.7 percent, or by 1.1 million, to 14.0 million. Employment fell by 0.7 percent, or by 615 thousand, to 89.2 million, with job losses in agriculture, livestock, forestry, fishing and aquaculture (-2.4 percent), construction (-4.1 percent) and trade, repair of motor vehicles and motorcycles (-2.6 percent). By contrast, there were increases in industry (1.8 percent) and accomomdation and food (3 percent).

People attached to the labour force, that is, either employed or unemployed but actively seeking for job rose by 0.5 percent to 103.3 million. Those detached from the labour force dropped by 0.3 percent to 64.4 million.

Compared with the same period a year earlier, the number of unemployed people surged 23.1 percent while employment dropped 1.5 percent.

The average real income (BRL 2,107) in the quarter ended April 2017 remained stable compared to the previous quarter (BRL 2,095) and also in relation to the same quarter of 2016 (BRL 2,052).

Thursday June 01 2017
Brazilian Economy Looks to Set For Recovery
Joana Taborda | joana.taborda@tradingeconomics.com

Brazilian economy expanded for the first time in two years in the March 2017 quarter and recent data points to recovery in private investment and production. However, sustained growth is heavily dependent on the government ability to pass fiscal reforms, reduce fiscal imbalances and restore consumer and business confidence which may be very difficult to achieve as President Tamer has been recently implicated in the corruption scandal.

The GDP grew 1 percent on quarter in the first three months of 2017, due to a jump in exports of oil, iron ore and soybeans and a smaller drag from consumer spending. On the production side, record harvest boost agriculture. On the negative side, public spending fell and investment continued to shrink while the services sector were flat.

The Industrial Entrepreneur Confidence Index has been recovering since the beginning of 2017 after reaching a record low of 36 in December of 2015. The index reached 53.7 in May, staying above 50 for the fifth consecutive month as managers remain confident in the future amid lower interest rates, fiscal reforms and business-friendly measures the government intends to implement. The manufacturing PMI rose to 52 in May, pointing to the strongest expansion in factory activity since February of 2013. In addition, the services PMI went up to 50.3 in April, the first expansion since February of 2015.

The inflation rate eased for the eighth straight month to 4.08 percent in April, the lowest since July of 2007, falling below the central bank target of 4.5 percent for the first time since December of 2009. The inflation has been slowing faster than anticipated as the real strengthened, prompting the central bank to ease monetary policy. The benchmark Selic rate was already cut by 400bps since October last year, standing at 10.25 percent and is expected to reach 8.5 percent by the end of 2017.

On the negative side, the unemployment has been rising rapidly, breaking record highs and reaching 13.7 percent in March. The economy shed 1.371 million jobs in 2016, following a 1.625 million loss in 2015, bringing employment to 5-year lows and hurting household spending. As a result consumer spending has been weak: retail sales fell 4 percent year-on-year in March of 2017, marking the 24th straight month of decline. The jobless rate is expected to continue to rise during 2017 before starting to fall in 2018 as the economy recovers.

The fiscal deficit was recorded at 8.9 percent in 2016 after reaching a record high of 10.2 percent in 2015 amid falling revenues, several tax exemptions and higher expenditure. The rapid deterioration of the country's finances has significantly raised the country's debt burden, leading to a gross debt of 69.5 percent of the GDP in 2016, higher than 65.5 percent in 2015. The government of Michel Temer already passed a fiscal cap amendment that limits the growth of federal government spending to the rate of inflation for 20 years. It also intends to pass several other reforms including a rise in retirement age, cuts in pensions and social benefits in an attempt to restore fiscal balance and confidence. However, such measures are expected to face strong political opposition.