Resumption of Growth: Official Discourse versus Reality

BRAZIL ECONOMICS - Report 19 Oct 2015 by Affonso Pastore, Cristina Pinotti, Marcelo Gazzano and Caio Carbone

The economic team insists that the Brazilian economy will start recovering soon, boosting tax revenues, which is necessary to generate primary surpluses. But a large mass of data indicates exactly the opposite. Two of these indicators are household consumption and GDP in the service sector. Numbers announced last week indicate that service sector GDP fell for the third straight quarter (a new record since the start of the quarterly series), and that household consumption fell by at least 4% since the start of the year, without any signs of reversal. These two trends provide further information indicating that GDP will contract by 3% in 2015, and that the downward path will continue in the first months of 2016, with the recession propagating and generating a new dip in GDP greater than the carry-over bequeathed by 2015.

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