Brazil contracts more than expected in April

Financial Times, 6/19/2015

Brazil’s first quarter contraction was bad. But the second quarter is shaping up to be even worse.

The Brazilian central bank’s IBC-Br index, a preliminary indicator of GDP growth, showed that Latin America’s largest economy contracted for the sixth time in the past seven months.

Economic activity fell 0.8 per cent in April from March as successive interest rate hikes and the austerity measures implemented by Joaquim Levy, Brazil’s new market-friendly finance minister, take their toll on the economy.

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Brazil’s economy falters, but worse may be to come

Nicolas Bourcier – The Guardian, 6/9/2015

The signs that Brazil’s economy is in trouble have been visible for a while now, but the worst could be still to come. The figures published last month for gross domestic product in the first quarter of 2015 confirmed the absence of growth that has plagued Latin America’s powerhouse for the past five years.

With GDP down by 0.2% since the new year – a fall of 1.6% compared with the same period of 2014 – Brazil has registered its worst result in six years. Even if it has actually fared better than the 0.5% drop forecast by the markets, the outlook for the world’s seventh-largest economy nevertheless looks gloomy. The figures are bad enough to reduce the already limited room for manoeuvre available to the newly appointed and ever so orthodox finance minister, Joaquim Levy. Last month he announced far-reaching austerity measures, with cuts amounting to 69.7bn reals ($22.4bn), prompting an outcry from members of his own party, who want a more flexible line.

The government led by President Dilma Rousseff is expecting a 1.2% fall in GDP, higher than the 1% forecast by the International Monetary Fund. If the first forecast is right, it would be Brazil’s worst performance in the past 25 years. “Everyone was hoping that the economy would bottom out in the first quarter,” says economist Paulo Gala, “but confidence is still deteriorating, [and] the volume of road transport is plummeting, as are car sales. The recession seems to be deepening.”

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Food shock over, Brazil inflation rate declines

Kenneth Rapoza – Forbes, 5/8/2013

Declining food prices helped Brazil’s monthly inflation index fall from 6.59% to 6.49%.  It’s not great, but it’s heading in the right direction.

Food inflation services have been the main culprit behind inflation this  year, but in April it was health and personal care groups that came in stronger than forecast, printing at 0.96% on the month for healthcare and 1.3% for personal care products.  Brazilians love their Nivea and Boticario.  The good news is that daily inflation surveys are suggesting that food inflation is moving down at an even faster pace, which means 6.49% won’t be topped in May.

“We see downside risks to inflation for May,” said Guilherme Loureiro, an analyst at Barclays Capital in São Paulo. He said in a note to clients on Wednesday that a temporary downtrend in domestic inflation plus renewed concerns about the global growth outlook, Barclays is still holding out for a 25 basis point rate hike in Brazil to 8.25%. That’ll happen mid-month if their analysis is right.

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Brazil isn’t growing—so why are Brazilians so happy?

The Economist, 05/07/2013

IN THE decade after Jim O’Neill of Goldman Sachs coined the acronym “BRICs” in 2001, grouping together four big countries with the potential for sustained growth, the “B”, Brazil, really put itself on the economic map. Having grown by 2.3% a year between 1995 and 2002, it grew by 4% annually in the following eight years. But Brazil then ran out of puff. It grew by a disappointing 2.7% in 2011, and a dismal 0.9% in 2012. Yet Brazilians seem blissfully unconcerned. IPEA, a Brazilian research institute, regularly finds that two-thirds to three-quarters of families say their financial situation improved during the past year, and that they expect it to get even better in the year ahead. In December Gallup, a global pollster, found that those optimistic about the economy outnumbered pessimists by a wider margin in Brazil than in any other large economy. Given that growth has stalled, why are Brazilians so happy?

The underlying reason is that even though the country as a whole is struggling, most families’ incomes are still rising fast. Unemployment is close to record lows and pay rises are comfortably outstripping inflation, partly because of big hikes to the minimum wage, but also because of that tight jobs market. Meanwhile, the gradual weaving of a social safety-net is rescuing many Brazilians from destitution. The result is falling inequality, a growing middle class — and a disconnect between GDP growth and most Brazilians’ actual experience.

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Brazil’s real closes weaker

Paul Kiernan – The Wall Street Journal, 05/02/2013

Brazil’s real closed moderately weaker against the dollar Thursday, likely influenced by financial and trade-related flows as well as a sharp decline in the euro after comments by Europe’s top central banker.

The real exited active trading at BRL2.0094 to the dollar, according to Tullett Prebon via FactSet, compared with Tuesday’s close of BRL1.9996. Brazilian financial markets were closed Wednesday for the country’s Labor Day holiday.

The euro, which Brazil’s currency sometimes tracks, lost around 1% of its value against the greenback after European Central Bank President Mario Draghideclined to rule out the possibility of cutting an interest rate on overnight deposits below zero. Implementing negative interest rates would be intended to encourage banks to lend or invest rather than leaving their extra cash at the ECB.

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Most emerging stocks drop on China data as Brazil sinks

Most emerging-market stocks fell as weaker growth in Chinese manufacturing overshadowed monetary easing in Europe and the prospect of interest-rate cuts in India. Brazil’s Ibovespa dropped for the first time this week.

Lenovo Group Ltd. (992) slumped 2.7 percent in Hong Kong after talks to buy parts of International Business Machines Corp.’s server division broke down, according to a person familiar with the discussions. Hyundai Merchant Marine Co. sank to an eight- year low in Seoul. Indian (SENSEX) stocks jumped the most in Asia, while Turkey rallied to a record. Brazilian mining company Vale SA, whose biggest export market is China, slumped 2.6 percent.

The MSCI Emerging Markets Index dropped 0.1 percent to 1,037.14 by 11:05 a.m. in New York, as 430 equities fell, while 351 rose. A private gauge of Chinese manufacturing declined last month, missing projections. The European Central Bank cut interest rates to a record low today, and the Reserve Bank of India will lower the repurchase rate for a third straight meeting, 33 of 40 analysts said in a Bloomberg survey.

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Barclays raises concern over Brazil

Kenneth Rapoza – Forbes, 04/30/2013

Brazil isn’t going broke anytime soon. Nor is it going the way of Venezuela and Argentina with its uber populist policies and threats of defaults of some kind or another — either through debt, or by canceling contracts with multinationals and just kicking them out of the country.  But Brazil is not doing as well as investors would like.

Solvency is not a short- to medium-term issue in Brazil, but according to Barclays Capital economist Marcelo Salomon in New York, the market is too complacent about the fiscal risks coming down the pike.

The breakdown of government expenses is worsening, Salomon says in a note on Tuesday, as investment spending remains very constrained.

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