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COUNTRY INSIGHTS

Interventions in the Exchange Rate to Help Secure Inflation
BRAZIL ECONOMICS · Report · 12 Aug 2013

The trend for the real to depreciate is continuing. At the start of the year, the exchange rate was around R$2.00/US$ while in recent weeks it only has not broken through the R$2.30/US$ barrier (Graph 1) because of the Central Bank’s interventions, with the sale of exchange rate swaps. Even with ...

Perfect Alignment of the Stars Lowers Inflation
BRAZIL ECONOMICS · Report · 07 Aug 2013

As expected, the IPCA showed significant deceleration in July, at only 0.03%, which is even lower than the IPCA-15 for the month, which had reached 0.07%. With this, the IPCA over the 12 previous months amounted to 6.27% (Graph 1), slightly below the upper bound of the target interval. The moveme...

Inflation: No help from fiscal policy
BRAZIL ECONOMICS · Report · 05 Aug 2013

For the past few weeks the official pronouncements have been celebrating the transitory fall of inflation caused by the reduction of food prices as a whole. But the end of this period is approaching, and from now on the dominant factor will be the effect of the weaker exchange rate on inflation. ...

Difficult Days Ahead
BRAZIL ECONOMICS · Report · 05 Aug 2013

Executive Summary The fall of food prices will still reduce inflation for a few weeks, but the pass-through of the weaker exchange rate to consumer prices will soon raise current inflation. Besides this, the government has exhausted its arsenal of actions on the prices of some specific products t...

Industrial Production: Slow Recovery in the First Half and Likely Deceleration in the Second
BRAZIL ECONOMICS · Report · 01 Aug 2013

Industrial output in June reversed the 1.8% decline in May, growing by 1.9%, and the rate over the preceding 12 months was 3.1%. However, it must be considered that the seasonal adjustment made by the IBGE does not account for the effect of the Corpus Christi holiday, which usually falls in June ...

Unemployment May Rise Slightly
BRAZIL ECONOMICS · Report · 29 Jul 2013

Explaining the behavior of unemployment in Brazil in recent years has been a challenge. It rose only slightly during the crisis of 2008, when Brazil faced a recession, and for the past year and a half it has remained roughly stable in seasonally adjusted terms (Graph 1), even with the progressive...

Less Growth and No Success in Reducing Inflation
BRAZIL ECONOMICS · Forecast · 29 Jul 2013

Executive Summary We have reduced the projections for GDP growth to 1.9% in 2013, and to 2% in 2014. Inflation will remain high (6% in 2013 and 6.5% in 2014); the exchange rate should stay in the range of R$2.25/US$ in 2013 and RS$ 2.30/US$ in 2014; and the trade surpluses should decline to US$ 5...

A Cooling Economy
BRAZIL ECONOMICS · Report · 15 Jul 2013

Three indicators point to cooling of the Brazilian economy: those for the labor market, industrial output and monthly GDP (IBC-Br). Brazil’s industrial production has not grown since 2010. The main reason for this stagnation is the rising unit labor cost. Despite clear signs of a weakening of the...

Retail Sales (May 2013)
BRAZIL ECONOMICS · Report · 11 Jul 2013

In May, retail sales in the restricted concept remained stable, but in the augmented sense (including cars and construction materials) there was a decline of 0.8%. In relation to May last year, the respective variations were 4.5% and 4.4% (Graph 1). Graph 1 Retail Sales – 12-month variation Among...

Political Weakness and Economic Mismanagement
BRAZIL ECONOMICS · Report · 10 Jul 2013

Executive Summary The perspectives for the Brazilian economy have taken a turn for the worse. The most optimistic projections for 2013 are for GDP growth below 2.5% (though still above 2%); inflation near (or slightly above) 6%; and the SELIC rate at 9.5% or 10%. The picture is further worsened b...

Caution over Investment Projections
BRAZIL ECONOMICS · Report · 08 Jul 2013

The only good news in the disappointing GDP results for the first quarter was the 4.6% increase in gross fixed capital formation. The question at this point is whether investments will continue on this recovery path, leading the investment rate to rise above 20% of GDP in 2013. The industrial pro...

Industrial Production: Investment Scenario Worsens
BRAZIL ECONOMICS · Report · 02 Jul 2013

In May industrial output fell by 2.0%, more than removing the 1.8% growth the previous month and continuing the recent pattern of huge volatility in the monthly growth rates, as can be seen in Graph 1. This volatility is less pronounced in the three-month moving average, calculated on the seasona...

Central Bank: Overoptimistic Forecasts for the Exchange Rate and Inflation
BRAZIL ECONOMICS · Report · 01 Jul 2013

The quality of any forecast depends on the quality of the underlying assumptions. In the Inflation Report for June, one of the Central Bank's forecasts is that inflation in 2014 will decline to 5.4%. This result is based on the assumption that the exchange rate will remain relatively stable at R$...

Credit Remains Weak
BRAZIL ECONOMICS · Report · 25 Jun 2013

The expansion of bank loans continues to be lethargic. Despite the decline of nearly 1.5 percentage points in the household debt service level since the July 2012, the current level remains high, sustaining the high default rate and deterring private banks from expanding credit. The only dynamism...

Brazil and the Changes in the External Scenario
BRAZIL ECONOMICS · Report · 24 Jun 2013

Since the signal sent by Chairman Bernanke at the press conference following the FOMC meeting in May, that the Fed's program of purchasing US$ 85 billion in assets per month would probably be tapered back in the second half this year, the global markets have been trying to adjust to the new reali...

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