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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Research briefing: Institutions for Macroeconomic Stability in Brazil

September 4, 2014

Briefing based on IRIBA working paper 7, “Institutions for macro stability: Inflation targets and fiscal responsibility,” by José Afonso and Eliane de Araújo – International Research Initiative on Brazil and Africa, 08/2014

In the 1960s, military governments promoted far reaching structural economic reforms, creating innovative and stable institutions based on standard international theories and best practice at the time.

In this context, the 1960s saw the launch of the Government Economic Action Plan (PAEG), which was intended to promote stabilisation and a return to growth. The fight against inflation took priority because it was impossible for the country to progress while suffering from hyperinflation.

With an initial focus on monetary institutions, financial reform was focused on creating long-term financing mechanisms, avoiding inflationary public sector financing, and re-attracting private sector investment to industry, in order to drive growth.

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Brazil Signals Key Rate on Hold Until Next Government Sworn In

September 4, 2014

David Biller and Raymond Colitt – Bloomberg, 09/03/2014

Brazil’s central bank signaled borrowing costs will remain unchanged until at least the end of the current administration in December as policy makers are trapped between a recession and above-target inflation.

The bank’s board, led by President Alexandre Tombini, yesterday held the benchmark rate at 11 percent for the third straight meeting, removing the phrase “at this moment” from the communique in an indication the key rate will remain on hold, Andre Perfeito, chief economist at Gradual Investimentos, said. All except one of the 54 analysts surveyed by Bloomberg correctly forecast the decision.

President Dilma Rousseff is trailing in polls as inflation near the ceiling of the target range has helped to erode consumer and business confidence. Yesterday’s monetary policy decision was the last before Brazilians select their leader in October. Marina Silva, who pledges to give the central bank president autonomy to bring inflation to the 4.5 percent target, would beat the incumbent in a runoff, polls show.

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Brazil’s Mantega says opposition win could wreck economy

August 29, 2014

Alonso Soto – Reuters, 8/28/2014

Brazil’s finance minister waded into the country’s presidential campaign on Thursday, warning that an opposition victory in the October election could push the economy into recession and undo a decade of social gains under the ruling Workers’ Party.

The comments by Guido Mantega, which the opposition and some analysts criticized as unbecoming of a sitting finance minister, came on the eve of the release of official data that is expected to show that Brazil, Latin America’s largest economy, is already in recession.

Brazil’s once high-flying economy has slowed sharply in the last four years under President Dilma Rousseff, complicating her chances for re-election in October. Growth is now at a crawl, inflation is running high, and business confidence has evaporated, discouraging investment.

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