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COUNTRY INSIGHTS

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...

Fiscal Policy: On a Deteriorating Path
BRAZIL ECONOMICS · Report · 14 Jan 2014

Executive Summary The primary surplus projections in the financial market are below the target, and the distance between the expected surplus and the target is widening. The government “fulfilled the commitment to the target” in 2013 only due to non-recurring revenues, which amounted to 0.9% o...

Informal Inflation Target Was Not Attained
BRAZIL ECONOMICS · Report · 13 Jan 2014

In 2013 the Central Bank failed to meet the informal target of lower inflation than in 2012. In reality, without the government’s abusive use of price control measures, inflation for the year would have been above the upper limit of the target interval (6.5%). This was the fourth straight year th...

2014: A Year of Many Challenges
BRAZIL ECONOMICS · Report · 13 Jan 2014

Executive Summary The first problem faced by the government at the start of 2014 is the weak economic growth. The deceleration in payroll levels and slow expansion of consumer credit are limiting growth of household consumption, and the uncertainties about the domestic economy are discouraging...

Industrial Production Remains Stagnant
BRAZIL ECONOMICS · Report · 09 Jan 2014

Industrial output fell 0.2% in November (seasonally adjusted), bringing the 12-month variation to just 0.4% (Graph 1). Although these rates exceeded the consensus projections, the result is by no means rosy, with the monthly rates continuing their recent pattern of high volatility without any cle...

The Trade Balance in 2013
BRAZIL ECONOMICS · Report · 06 Jan 2014

Brazil’s trade balance fell from US$ 19.4 billion in 2012 to only US$ 2.5 billion in 2013, with imports growing 7.4% and exports shrinking by 0.2%, influenced by the end of the cycle of rising commodity prices (Graph 1). This is the lowest trade balance since 2001. The decline in the trade balanc...

Economic Activity: What Do The Most Recent Data Indicate?
BRAZIL ECONOMICS · Report · 16 Dec 2013

In the past few days two indicators of economic activity have been published: real retail sales, estimated by the IBGE; and the IBC-Br, which is the proxy for GDP estimated by the Central Bank. Both indicate growth in October in relation to September. These figures partly allay the negative pictu...

Confused Reactions to a Worsening Scenario
BRAZIL ECONOMICS · Report · 09 Dec 2013

EXECUTIVE SUMMARY The GDP result for the third quarter put paid to optimism regarding Brazilian growth. Not only have the perspectives worsened for 2013; the outlook is now more likely for mediocre growth in 2014. If we take stock prices as a leading indicator of growth, they point to acceleratio...

The Current Account Deficit and Fiscal Policy
BRAZIL ECONOMICS · Report · 09 Dec 2013

Between December 2012 and the end of last October, the current account deficit rose from US$ 54.2 billion, or 2.4% of GDP, to US$ 82.2 billion, or 3.7% of GDP (Graph 1). The worsening of the current accounts closely follows the decline of the trade balance, which are near zero and are only not wo...

A New Leading Indicator of Economic Activity
BRAZIL ECONOMICS · Report · 06 Dec 2013

Executive Summary In this report, we present a new leading indicator of economic activity in Brazil. Its most important characteristic is to forecast the turning points of economic cycles. Our methodology follows that of the OECD. In constructing our indicator, we started with 52 candidate variab...

Industrial Production: Positive Result, But Not a Clear Recovery Trend
BRAZIL ECONOMICS · Report · 04 Dec 2013

Industrial output has been extremely volatile for several months, so much so that it even appears in the 12-month rates, which by construction should behave more smoothly (Graph 1). For this reason, the short-term numbers only provide imprecise information on the trend. The data in Graph 1 show a...

GDP: Another Frustrating Result...
BRAZIL ECONOMICS · Report · 03 Dec 2013

The frustrating GDP growth in the third quarter – worse than the median of market forecasts – requires us not only to revise the projection for GDP growth in 2013, but also for 2014. The third-quarter result has made it virtually impossible to reach our previous projection of 2.5% growth in 2013....

What Can Be Expected From Fiscal Policy?
BRAZIL ECONOMICS · Report · 02 Dec 2013

Participants in the financial market have long known that at the moment the rating agencies change a country’s risk rating, the risk premiums remain virtually unchanged. Therefore, from the standpoint of their reflection on asset prices, changes in countries’ ratings are “non-events”. The reason ...

Credit: Effects of the Bank Strike and Some Moderation by Public Banks
BRAZIL ECONOMICS · Report · 28 Nov 2013

The total stock of credit as a percentage of GDP remained virtually unchanged in October, at 55.4%, versus 55.5% in September. The growth of credit in real terms continued to decelerate, reaching 8.3% in the 12 months through October (Graph 1). In September and October, this deceleration may have...

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