Brazil Central Bank Cuts Inflation Forecast on Slow Growth

September 30, 2014

Matthew Malinowski and Mario Sergio Lima – Bloomberg, 09/29/2014

Brazil’s central bank cut its 2014 inflation forecast, saying the world’s second-biggest emerging market will grow at a “disinflationary” pace over the next quarters.

Consumer prices will rise 6.3 percent this year if policy makers keep the benchmark Selic (BZSTSETA) at 11 percent, according to the reference outlook in the quarterly inflation report published today. The inflation forecast compares with a 6.4 percent estimate for 2014 in the June report. Consumer prices will rise 5.8 percent in 2015, compared with a 5.7 percent forecast in June. Policy makers also said the economy will expand 0.7 percent this year, down from the previous estimate of 1.6 percent.

“Taking into account the growth outlook for the next quarters, the committee assesses that the output gap over the next quarters will remain in disinflationary territory,” policy makers said. They reiterated inflation will converge toward its 4.5 percent target in 2016.

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Brazil bank lending dormant as new round of stimulus fails

September 26, 2014

Guillermo Parra-Bernal and Luciana Otoni – Reuters, 9/26/2014

Bank lending in Brazil slowed for a seventh straight month in August, another sign that recent measures to unlock personal credit failed to offset the impact of high borrowing costs and weak economic activity.

Outstanding loans in Brazil’s banking system rose 11.1 percent in the 12 months through August, the central bank said in a report published on Friday. According to Thomson Reuters calculations, the annual growth of bank loan books is running at the slowest pace since at least late 2003.

Lending rose 1 percent in August from the prior month, reaching 2.86 trillion reais ($1.18 trillion), the report said. Loans in arrears for 90 days or more, the industry’s benchmark gauge for credit delinquencies, remained stable at 5 percent of outstanding loans last month.

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Brazil’s household survey: Slower going

September 22, 2014

J. P. – The Economist, 9/21/2014

Brazil is, famously, one of the world’s most unequal countries. Income of the richest 10% of the population is 38 times that of the poorest tenth. The ratio in Poland, which has similar income per person, is just eight to one. But at least the left-wing Workers’ Party (PT), in power since 2003, has been able to claim that, unlike in most other places, Brazilian inequality has fallen consistently on its watch. On September 18th it seemed this trend had come to an end. Data from the annual household survey, a mini-census of 150,000 families, showed an uptick in Brazil’s Gini coefficient, from 0.499 in 2012 to 0.500 in 2013 (0 signifies everyone has an identical income and 1 means that a single household takes everything).

If this was unwelcome news for President Dilma Rousseff, who is seeking a second term in an election two weeks from now, the next day offered hope of a respite. The national statistics office (IBGE), which compiles the survey, announced that it contained “extremely serious errors”, caused by applying the wrong weights to some of Brazil’s regions. Revised figures show that the Gini in fact edged down to 0.497.

Other tweaks—not to mention the very public cock-up—offered less for Ms Rousseff to cheer about. Brazil’s median inflation-adjusted household income rose by just 2.3% between 2012 and 2013, not 4% as originally thought. Illiteracy dipped from 8.7% to 8.5%, not to 8.3%.


Brazil inflation: on the up again

September 19, 2014

Jonathan Wheatley – Financial Times, 9/19/2014

As Brazil’s polling day draws closer, another data point emerged on Friday for the voters’ consideration: consumer price inflation is back above the upper limit of the government’s target range and shows no sign of falling back soon.

The IBGE, Brazil’s statistics office, said CPI in the month to mid-September was 0.39 per cent, bringing the accumulated rate over the past 12 months to 6.62 per cent. That was above the consensus forecast of 0.35 per cent for the month, according to Bloomberg.

Inflation is running at its fastest rate in more than a year, just as the campaign for elections on October 5 heats up. Until recently, voters seem to have paid little attention to Brazil’s weakening economy, which was in recession in the first half of this year. But a wave of bad economic data may have contributed to the recent poor performance in opinion polls of Dilma Rousseff, hoping to be re-elected to the presidency, as voters make the connection between economic mismanagement and the woeful standard of Brazil’s public services, which brought thousands of protesters onto the streets last year.

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Brazil’s inflation to pierce target ceiling in mid-September

September 17, 2014

Silvio Cascione and W Simon – Reuters, 09/16/2014

Brazil’s annual inflation rate probably pierced the government’s target ceiling in mid-September as airfares rose and food prices slowed their decline, according to analysts surveyed in a Reuters poll published on Tuesday.

Consumer prices BRIPCY=ECI are seen up 6.57 percent in the 12 months to mid-September, slightly above the 6.5 percent ceiling of the official target range, according to the median of 23 forecasts in the survey.

In the month to mid-September, consumer prices BRIPCA=ECI probably rose 0.35 percent, up from a 0.14 percent gain in the month to mid-August, according to the median of 28 forecasts. The inflation data is due to release on Friday at 9 a.m. (8 a.m. EDT.)

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Brazil’s July Economic Activity Increases More Than Forecast

September 12, 2014

Mario Sergio Lima – Bloomberg, 9/12/2014

Brazil’s economic activity in July rose more than economists forecast, as the central bank signals it will keep interest rates on hold in the world’s second-biggest emerging market.

The seasonally adjusted economic index, a proxy for gross domestic product, rose 1.50 percent in July from the prior month after contracting a revised 1.51 percent in June, the central bank said today in a report posted on its website. The median estimate from 30 economists surveyed by Bloomberg was for a 1 percent expansion.

Brazil’s economy slipped into recession in the second quarter as above-target inflation erodes consumer and business confidence. Moody’s Investors Service cut the nation’s credit rating outlook this week, citing “the absence of any signs of a recovery.” With presidential elections less than a month off, economic management has become central to the campaign.

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Better than Ukraine

September 5, 2014

The Economist (print edition), 9/6/2014

“We are not in a recession,” insisted Guido Mantega, Brazil’s finance minister, on August 29th. According to the most common definition—two consecutive quarters of falling output—he is wrong. Official figures released earlier that day showed that GDP fell by 0.6% between the first and second quarters (an annualised contraction of 2.4%). Output also fell, by 0.2%, in the first three months of the year.

Brazil’s economy has now shrunk in three of the last four quarters. Most analysts think it will not grow at all this year; a year ago they were expecting growth of 3%. In 2015 the economy is likely to expand by only 1%. Not even Mr Mantega can deny that Brazil is going through a rough patch.

The government blames a weak global recovery from the financial crisis of 2008-09 and a surfeit of public holidays during the month-long football World Cup, which concluded in Brazil on July 13th. These were decreed by federal, state and municipal authorities to ease pressure on public transport as hordes of fans descended on host cities. Itaú, a big Brazilian bank, reckons fewer working days account for half the latest fall in GDP. (Critics note that the Copa was meant to be an economic boon, not a curse.) Industrial production picked up in July, with its fewer feriados—but not nearly enough to offset June’s 1.4% decline. Inventories remain uncomfortably high: carmakers’ stocks, for instance, are 50% bigger than usual.

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