Declining Confidence Indicates Recession

BRAZIL ECONOMICS - Report 02 Mar 2015 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

The confidence indexes produced by FGV have a proven track record of pointing to economic trends. And all of them indicate a new round of deceleration.

We start with the consumer confidence index (Graph 1), which has been falling since the second half of 2012, and more steeply since the middle of 2014. In February it fell to 85.4 points, the lowest level since it started to be measured, in September 2005. It now stands 10% below the level reached at the worst point of the international crisis at the end of 2008. In measuring the confidence of consumers, FGV uses objective questions about the respondents’ perception of labor market conditions and inflation, which in the final analysis determine their expectation on the evolution of real disposable income for consumption.

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