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COUNTRY INSIGHTS

The disappointing real retail sales and consumption numbers
BRAZIL ECONOMICS · Report · 17 Sep 2018

One of the hopes for stronger recovery in 2018 was the acceleration of household consumption in 2017. More specifically, the hope was that the combination of lower real interest rates and reduced household debt service ratios would lead to maintenance, or even elevation, of the quarterly growth r...

A climate of uncertainty leading to opposite scenarios
BRAZIL ECONOMICS · Report · 10 Sep 2018

Brazil is in the midst of a fiscal crisis that is still in latent state, and may or may not become an open crisis. In October a new president will be elected, and it is not known on what diagnosis the next government will base its economic policy actions, or if there will be sufficient congressio...

Weakness of gross fixed capital formation
BRAZIL ECONOMICS · Report · 10 Sep 2018

The decline of gross fixed capital formation (GFCF) was the factor that caused the greatest disappointment in the announcement of the GDP numbers for the second quarter. Based on our monthly indicator of GFCF, it is clear that part of that result was due to the truckers’ strike. However, not only...

Synthesis of the Brazilian economy
BRAZIL ECONOMICS · Report · 03 Sep 2018

With less than a month to go before the first presidential election round, without any inkling of which two candidates will advance to the second round, the economic scenario depends as never before on political outcomes. Although some observers try to minimize the differences in the candidates’ ...

The longest and deepest cycle in Brazil’s history
BRAZIL ECONOMICS · Report · 03 Sep 2018

The GDP result for the second quarter reinforces our projection that the economy will only grow by 1.0% in 2018. However, the second-quarter performance cannot be attributed wholly to the truckers’ strike. It unquestionably played a role, but the most recent numbers confirm that after the effects...

Exchange rate volatility and fiscal fragility
BRAZIL ECONOMICS · Report · 27 Aug 2018

Last week Brazil was once again included in the group of countries facing the largest currency depreciations. Unlike Turkey and Argentina, which are highly dependent on capital inflows to finance their current account deficits, Brazil has no balance of payment problems. In the past 12 months, its...

The frustrating behavior of the labor market
BRAZIL ECONOMICS · Report · 20 Aug 2018

Employment growth is fundamental to accelerate a cyclical recovery, but unfortunately this is not happening in Brazil. The unemployment rate has only fallen by 0.7 percentage point since the end of the recession, from 13.0% to 12.3%. And more careful analysis of the job market’s behavior reveals ...

The monetary policy bearings
BRAZIL ECONOMICS · Report · 13 Aug 2018

The final days of last week were marked by strong depreciation of the Turkish lira, followed by intense movements of the South African rand and Argentinian peso. Movements like these tend to spread to other emerging country currencies, and will likely affect the real in particular due to the unce...

Synthesis of the Brazilian economy
BRAZIL ECONOMICS · Report · 06 Aug 2018

As expected, the electoral scenario has been gaining clearer outlines as the deadline for officially registering candidacies approaches. As things stand now, the chances have decreased of two candidates from opposite extremes of the political spectrum reaching the second round, allaying the fears...

Monitoring the economic activity trend
BRAZIL ECONOMICS · Report · 06 Aug 2018

Since the end of the truckers’ strike, the signals emitted by the high-frequency economic activity indicators have been buried in a veritable avalanche of noise, hampering identification of the economic recovery trend. Our evaluation, based on the most recent information, is that recovery continu...

Political uncertainty and asset price volatility
BRAZIL ECONOMICS · Report · 30 Jul 2018

Although the real has recently appreciated in parallel with the drop in the country’s CDS quotations and slight flattening of the yield curve, asset prices remain extremely volatile. That variability is partly due to the change in the international scenario, dominated by the monetary normalizatio...

Perspectives for the credit supply
BRAZIL ECONOMICS · Report · 30 Jul 2018

The flows of new credit in real terms, both to households and firms, remained stable in the first half of 2018. On the one hand there was a steady decline in the interest rates on loans, together with a reduction in the level of default, indicating better credit conditions. On the other, the indi...

Inflation: Nothing wrong with the Central Bank’s conduct
BRAZIL ECONOMICS · Report · 23 Jul 2018

When coincidentally with the truckers' strike we witnessed a more pronounced depreciation of the real and a steeper slope of the yield curve (including the short end, rates up to 1 year), there was no shortage of cries for an increase of the SELIC rate. If the Central Bank had done that, it would...

Worse international conditions alongside domestic disarray
BRAZIL ECONOMICS · Report · 16 Jul 2018

The Central Bank long warned that the benefits of a favorable international situation were masking the damage caused by the absence of fiscal reforms, especially of the pension system. The fiscal reform efforts are stalled and now the international conditions have worsened, with the robust and sy...

The waning industrial output in the second quarter
BRAZIL ECONOMICS · Report · 10 Jul 2018

The truckers’ strike undermined industrial output in May, and when all the numbers are known, gross industrial production in the second quarter should also show a decline. Although not enough information is yet available about the service sector, which has large weight in GDP, preventing assessin...

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