Economic Activity: Anything New?

BRAZIL ECONOMICS - Report 20 Jan 2020 by Affonso Pastore, Cristina Pinotti and Marcelo Gazzano

With the IBOVESPA climbing above 110 thousand points at the end of 2019, a new wave of optimism about faster growth emerged. This has now been boosted by the apparent success of a USA/China trade deal, which has improved the outlook for the international economy. However, the most recent data on the Brazilian economy’s recovery continue to suggest caution. While on the one hand, net hiring in the formal labor market has increased, on the other, industrial production remains in the doldrums, and the numbers on real retail sales in the augmented sense (including automobiles and building materials) confirm the estimate that the acceleration of household consumption at the end of the year was benefited by the release of withdrawals from FGTS accounts. A stronger rebound of growth will require higher gross fixed capital formation, which in turn depends on greater confidence based on continued progress of the reform agenda.

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