GDP in the First Quarter: the Recession is Deepening

BRAZIL ECONOMICS - Report 01 Jun 2015 by Affonso Pastore, Marcelo Gazzano, Cristina Pinotti and Caio Carbone

GDP in the first quarter of 2015 contracted by 0.2%, which was less than the consensus projections. Still, there are no reasons for optimism. On the demand side, after many years of steady growth, there was a sharp drop in household consumption, and on the supply side, besides the fall in GDP in the service sector, the decline in industrial output would have been much worse had it not been for the performance of mineral extraction (basically production of crude oil). These contractions were softened by growth of 4.7% in agriculture, led by the soybean harvest. The behavior of household consumption, industrial production and GDP in the service sector closely followed the respective confidence indexes, and these give clear signs that the contraction of GDP in the second quarter will be much greater than in the first three months.

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