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COUNTRY INSIGHTS

The Signals from the Labor Market
BRAZIL ECONOMICS · Report · 25 Nov 2013

Since the middle of 2012, the seasonally adjusted unemployment rate has been holding steady near historic minimum levels. However, this is not the result of hiring from a growing labor force flow, which if true would indicate progressive tightening of the job market. In reality what has been happ...

Political Cycles: 2010 and 2014
BRAZIL ECONOMICS · Report · 18 Nov 2013

Election years are usually accompanied by political cycles: governments abandon fiscal and monetary austerity in search of ways to stimulate aggregate demand and reduce unemployment. The overall aim is to boost the popularity of the candidate supported by the party in power. This happened in Braz...

Retail Sales: Unequal Performance Among Sectors
BRAZIL ECONOMICS · Report · 13 Nov 2013

In September, while real retail sales in the restricted sense (without cars and construction materials) grew 0.5%, sales in the augmented sense fell 0.7% (Graph 1). With this, the result for the third quarter was highly discrepant between these two categories: in the restricted sense sales growth...

Greater Risks and Less Fiscal Policy Leeway
BRAZIL ECONOMICS · Report · 11 Nov 2013

Last week the center of attention returned to the timing of the Federal Reserve’s tapering. After the publication of good indicators for the American economy, such as the higher non-farm payroll figures, the rate on 10-year Treasuries climbed nearly 20 basis points (Graph 1). This movement was ac...

IPCA: Inflation is Becoming More Bothersome Again
BRAZIL ECONOMICS · Report · 07 Nov 2013

As expected, the IPCA for October accelerated, reaching 0.57%, after registering 0.35% the month before. Since the monthly rate was very near that of October last year, the accrued 12-month variation changed very little, falling from 5.86% to 5.84%. The acceleration in October was mainly caused b...

Politics Clouding the Economic Horizon
BRAZIL ECONOMICS · Forecast · 04 Nov 2013

Executive Summary There will be no way for the government to repeat in 2014 the high economic stimulus dose applied in the last presidential election year (2010), which succeeded in boosting GDP growth to 7.5% that year, but also left an inflationary legacy that raised the 12-month IPCA measure a...

Price Controls and Fiscal Policy
BRAZIL ECONOMICS · Report · 04 Nov 2013

The fiscal result for September was disastrous. The consolidated public sector (central plus state and municipal governments) recorded a primary deficit of R$ 9 billion. This lowered the primary surplus in proportion to GDP to 1.6% against 1.8% in August. After correcting the official figures for...

Cooling of the Labor Market and Perspectives for Consumption
BRAZIL ECONOMICS · Report · 28 Oct 2013

The seasonally adjusted unemployment rate in September rose slightly, from 5.3% to 5.4%, still near the historic low levels where it has hovered for some time now. This could lead to the conclusion that the job market remains hot, favoring growth of consumption. But a deeper look at the informati...

Only Moderate Growth of Consumption, Despite Positive Signals
BRAZIL ECONOMICS · Report · 21 Oct 2013

Growth of retail sales in the restricted sense (excluding cars and construction materials) was surprisingly strong again in August. Graph 1 shows that in the quarter through August, these sales expanded at an annualized pace of 10.5%, showing continued strong acceleration in relation to the first...

Retail Sales in the Restricted and Augmented Senses with Different Behavior
BRAZIL ECONOMICS · Report · 15 Oct 2013

In August, real retail sales in the restricted definition once again came as a positive surprise, with seasonally adjusted growth of 0.9% (+2.1% in July). However, sales in the augmented concept, which includes cars and construction materials, were much weaker. The 12-month rates constructed from...

Economic Policy Changes: What is the Importance?
BRAZIL ECONOMICS · Report · 14 Oct 2013

Executive Summary The Central Bank indicated there will be one more increase of 50 basis points in the SELIC rate. The 12-month forward-looking inflation expectations stand at 6.2%, and assuming a neutral real interest rate between 4% and 5%, the SELIC rate would have to be raised higher than 10....

Has the Central Bank Increased its Degrees of Freedom?
BRAZIL ECONOMICS · Report · 14 Oct 2013

At the COPOM meeting last week the Central Bank decided to raise the SELIC rate by 50 basis points, to 9.50%. This move had already been widely expected by the market, but the repetition of basically the same communiqué as issued after the previous meetings that were followed by 50-point increase...

IPCA: End of a Benign Period
BRAZIL ECONOMICS · Report · 09 Oct 2013

In September the IPCA rose 0.35%, greater than the increase of the IPCA-15 for that month (0.27%). With this, inflation over the preceding 12 months accumulated a variation of 5.86% (Graph 1). The IPCA for September should mark the end of a cycle of about four months of relatively benign monthly ...

Improved Trade Balance in September: Effect of the Real Exchange Rate Still Small
BRAZIL ECONOMICS · Report · 07 Oct 2013

Brazil’s trade balance in September was in surplus by US$ 2.1 billion, indicating recovery. On a seasonally adjusted basis, the annualized surplus of US$ 16.4 billion is the largest since the end of last year (Graph 1). However, this result cannot be attributed to the weaker real exchange rate. G...

Industrial Production Stagnant and Without Good Perspectives
BRAZIL ECONOMICS · Report · 02 Oct 2013

Industrial production in August was stable, causing a decline of 1.2% in the 12-month variation (Graph 1). With this, the carry-over to the third quarter reached -1.7%, meaning that for output to remain stable in the quarter, growth in September will have to be 5.1%, which is highly unlikely. In ...

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