Consumption Will Continue to Be the Engine for Recovery

BRAZIL ECONOMICS - Report 04 Nov 2019 by Affonso Pastore and Cristina Pinotti

With the strong headwinds coming from the global economic slowdown, the total impossibility of any fiscal stimulus, and the still-repressed level of capital expenditures caused by the high uncertainty, household consumption is the only force that can boost recovery. Although fitfully, consumption has been growing since the end of the recession (at the start of 2017), and we expect the lower interest rates and expansion of credit to produce some acceleration. The short-term outlook will also be aided by withdrawals from FGTS accounts, but this will only be a one-off effect. Stronger growth of consumption depends crucially on improvement of the job market, which is still sluggish, with a large contingent of informal, discouraged and underemployed workers, preventing a stronger upswing in consumer confidence.

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