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Brazilian Economy Likely contracted in Q1 on Falling Private Domestic and External Demand

May 29, 2015 by Live Forex news

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The fall in industrial production and economic activity (both supply-side indicators) points to demand-side contraction in Q1 of -1.7% yoy or -0.8% qoq (versus a contraction of -0.3% yoy in Q4). Given the acute fall in industrial production in Q1, analysts still consider this a positive surprise. Societe Generale’s full-year forecast is for growth of -1.1% as against 0.2% in 2014. Numbers apart, the economy is in recession, and there is little hope of a near-term recovery.All the components of demand – consumption, investment, public spending and net exports – continue to face headwinds, and the economy needs either internal (policy reforms) or external (commodity prices and demand) shocks to see a meaningful recovery in the medium term. The current growth forecast for 2015 assumes slightly weaker consumption (0.8% vs 0.9% in 2014), a further and more substantial collapse in investment (-6.1% vs -4.3%), a contraction in public spending (-0.2% vs 1.4%) and a very small – but positive – contribution from net exports thanks to falling imports, estimates Societe Generale. Below-potential growth recovery in 2016 is expected, but largely on the back of a base effect rather than any meaningful change in business sentiment -the key driver that could return the economy to its growth trend. 

The material has been provided by InstaForex Company – www.instaforex.com



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