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The latest data indicate a sharp improvement in Brazil’s economy for the first quarter of 2017. According to the Central Bank Economic Activity Index, February’s increase in GDP was the highest monthly figure since 2010 (+1.3%) and follows a 0.6% rise in January. This takes first-quarter growth to 5.1% on an annualised quarterly basis, meaning that if economic activity remains stable in March, it will have increased at a rate of 5.1% for the first three months of the year.
OUR ANALYSIS
After eight straight quarters of recession, the sharp recovery in January and February has raised hopes for a positive first-quarter 2017 growth rate. PMI survey data are also encouraging, although they remain at weaker levels (48.7 for March’s composite reading).
Going forward, the economy is expected to continue on an upward path on the back of stabilising commodity prices, slower inflation boosting household purchasing power, looser central bank monetary policy and an end to inventory drawdowns. That said, the recent order by Brazil’s Supreme Court to investigate 108 high-profile names, including several of Michel Temer’s cabinet ministers, highlights the country’s significant political risk.
The opinion expressed above is dated April 18th, 2017, and is liable to change
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