Brazil: Back-to-back tumble in activity in 19Q1 – Rabobank


In Brazil, the IBC-Br, which is the BCB’s broad activity index and high-frequency proxy for IBGE’s (official) quarterly GDP, plunged 0.7% m/m in February, following a drop of 0.3% m/m in January.

Key Quotes

“In terms of trends, the quarterly sequential growth points to an annualized contraction around 1% q/q. The carry over for 19Q1 stands at -0.6% q/q (2.6% annualized), much worse than the figure of 0.2% (or 0.7% annualized) seen in 18Q4.”

“With activity numbers deteriorating quite rapidly, we have already revised down our GDP growth estimate for 19Q1 to +0.2% (from +0.5%) and for the full-year to 1.5% (from 1.8%).”

“Yet the odds still look highly skewed to the downside, with uncertainties about reforms expected to keep weighing on the animal spirits of the private sector.”

“As far as the monetary policy outlook goes, obviously the disappointing activity (in a context of wide economic slacks and still anchored expectations) could well put the BCB in easing mode from 19Q4 onwards. However, that is true only if/when an effective pension reform is (more clearly) about to pass in Congress.”

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