By Gabriel Burin
BUENOS AIRES (Reuters) – Brazil’s economy expanded strongly in the latest quarter compared with the first three months of the year, driven by household spending, a Reuters poll showed.
But higher imports of goods and services have likely had a negative impact on the country’s growth, after less dynamic exports were outpaced in early 2024 by a strong exchange rate, which has recently fallen.
Second-quarter gross domestic product figures, due on Tuesday, are expected to show growth of 0.9% from the January-March period, when the economy expanded 0.8%, according to the median forecast of 18 analysts polled from Aug. 28 to Sept. 2.
“We estimate the Brazilian economy grew by 0.9% in the quarter, and by 2.7% on an annual basis… likely supported by resilient private consumption benefiting in part from strong labor markets and rising real wages,” Barclays economists wrote in a report.
Government spending contributed with an increase in social benefits and flood relief in April and May, but “on the other hand, the external sector was likely a drag on growth due to higher imports,” they added.
In a report, analysts at Santander saw a 7.8% quarterly increase in imports versus a much lower 1.3% increase in exports. In the first quarter, imports and exports grew by 6.5% and 0.2% respectively, as Brazilians invested heavily in foreign goods and services.
From a supply perspective, total industrial production, including mining, should have increased by 1.2%, Santander said. This growth was partly offset by a 2.4% contraction in the smaller agricultural sector.
On an annual basis, economic growth in the second quarter was 2.7%, according to the survey, the highest rate since the 3.5% in the same period of 2023, after the inauguration of President Luiz Inacio Lula da Silva early last year.
“Brazil’s growth is particularly surprising, as the economy could expand by almost 3% for the second year in a row, outperforming the region’s peers on average in 2023 and 2024,” JP Morgan economists wrote in a report.
“We expect this strength to continue into the third quarter, but foresee some slowdown going forward as both monetary and fiscal policy will constrain growth for the first time in a long time.”
Last week, Lula indicated he would accept a possible rate hike from his nominated central bank chief for 2025-2028, while the finance ministry pledged to deliver on its promise of fiscal discipline by the end of the year.
(Reporting and polling by Gabriel Burin; Editing by Ross Finley and Christina Fincher)
