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COUNTRY INSIGHTS

Inflation: Uptick Prevents Ending the Tightening Cycle
BRAZIL ECONOMICS · Report · 24 Mar 2014

Until recently the signals from the Central Bank were that since inflation was decelerating, the end of the monetary tightening cycle was nearing. But the period of decelerating inflation was short lived. The resistance of some free prices, especially of services, combined with the sharp rise of ...

Inflation: Little Room to Absorb Shocks
BRAZIL ECONOMICS · Report · 17 Mar 2014

Inflation had been decelerating, declining from 6.7% in June 2013 to 5.6% in January 2014, but the 0.69% increase of the IPCA in February ended this more favorable period, putting the rate over the past 12 months at 5.7%. The tendency from now on is for oscillation around the upper bound of the t...

The Economy in 2014: Projections And Risks
BRAZIL ECONOMICS · Forecast · 17 Mar 2014

Executive Summary A combination of wishful thinking and diagnostic mistakes has put the government in a situation, in an election year, of weak economic growth and high inflation. The outlook for 2014 is weaker GDP growth than last year, of only 1.5%, and inflation rising to around 6.3% at year-e...

Industrial Production and Leading Indicator: Weak Growth in the Year
BRAZIL ECONOMICS · Report · 11 Mar 2014

Part of the contraction of industrial output in December (-3.7%) was reversed with the rise of 2.9% in January, continuing the recent pattern of extreme volatility of the monthly data (Graph 1). The 12-month rate remained negative and virtually stable (-2.4%, versus -2.5% in December). Based on t...

The Exchange Rate and Domestic Fundamentals
BRAZIL ECONOMICS · Report · 10 Mar 2014

The real has been appreciating since the middle of April, reaching nearly R$2.30/US$. But it was not the announcement of the primary surplus target that led to this temporary strengthening cycle, because in the same period a similar movement has occurred with the currencies of the great majority ...

The Performance of GDP in the Fourth Quarter of 2013
BRAZIL ECONOMICS · Report · 28 Feb 2014

The GDP growth of 0.7% in the last quarter of 2013 (Graph 1) came as a surprise: it was above the most optimistic projections. In contrast, GDP contracted in the third quarter by 0.5%. With this, growth in 2013 reached 2.3%. The main surprise was gross fixed capital formation, which instead of th...

The Announcement of the Primary Surplus Target
BRAZIL ECONOMICS · Report · 24 Feb 2014

The announcement of the primary surplus target was greeted by the market with an appreciation of the real and a downward shift of the entire yield curve – the short and long ends (Graph 1). Thus it was a positive reaction. In reality, the real was not the only emerging market currency to get stro...

Slowing Real Retail Sales Growth
BRAZIL ECONOMICS · Report · 17 Feb 2014

Growth of real retail sales decelerated substantially in 2013. In the restricted sense, sales grew 4.3%, just over half the figure in 2012 (8.4%), while in the augmented sense (including cars and construction materials), growth was 3.6%, less than half the rate (8.0%) in 2012 (Graph 1). In this r...

The Government’s Options in an Election Year
BRAZIL ECONOMICS · Report · 10 Feb 2014

Executive Summary Brazil’s current account deficits are large in relation to the capital inflows, putting pressure on the real. Along with this, inflation is high and economic growth has been decelerating. The situation cannot yet be called stagflation, but there is a risk of this in the near ...

Slowing Growth and Uncertainties Over the Interest Rate
BRAZIL ECONOMICS · Report · 10 Feb 2014

The sharp contraction of industrial production in December was a big surprise. The index not only revealed that output fell in the fourth quarter, but also that because of the carry-over to the first quarter of 2014, it will be very hard to achieve a positive variation of the industrial productio...

Industrial Production: A Bad Result in December
BRAZIL ECONOMICS · Report · 05 Feb 2014

Industrial production fell sharply in December, causing the fourth-quarter result to fall as well and leading to a downward revision in the overall GDP growth projections for the last quarter of 2013. The negative carry-over left by industry to the start of 2014 suggests growth in the first month...

The Central Bank and its Difficult Mission
BRAZIL ECONOMICS · Report · 03 Feb 2014

Emerging countries are being sharply penalized by the markets at the start of this year. The recovery of the advanced economies, especially the American, is reducing global liquidity, which is happening alongside signals of slower growth in China, accentuating the uncertainties. This cycle is the...

Elevation of the Selic Rate: What Will Be the Next Step?
BRAZIL ECONOMICS · Report · 27 Jan 2014

There are two interpretations for the 50-basis-point hike in the SELIC rate at the last COPOM meeting. The first is that it was a reaction to the “surprisingly high” inflation in December, to be followed by slight deceleration in January, strengthening the expectation of just one more increase, o...

Was the COPOM Decision Unexpected?
BRAZIL ECONOMICS · Report · 20 Jan 2014

The expression most heard just after the decision at the last COPOM meeting to raise the SELIC rate by 50 basis points, and extending the cycle of the rate increase, was that it was a “surprise”. For those only looking at the fact that “official” inflation was below the upper bound of the target ...

Real Retail Sales: Latest Data
BRAZIL ECONOMICS · Report · 16 Jan 2014

Real retail sales expanded in November. In the restricted sense (without cars and building materials), the increase was 0.7%, while in the augmented concept growth was 1.3% (Graph 1). The 12-month rates were 7.0% and 5.7%, respectively. Given the carry-over of 2.5% in augmented sales, even with t...

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