Research Dept. News
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Monthly Report, num 305 - September 2007
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International review - Brazil
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Brazil takes upward course
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Brazil maintaining growth level with boost of 4.2%.
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The figures for the economy are looking much more solid and balanced than in previous periods. The GDP grew by 4.2% year-on-year in the first quarter thus maintaining the level of the growth cycle. The recovery of private consumption and investment, with growth of 6.0% and 4.0% respectively, constitute some guarantee of this continuing. But the up to now successful foreign sector reduced its contribution to the rise with imports that increased growth to 5.9% as against exports that slowed to growth of 7.2%, more because of the rise in the services deficit than a drop in the trade surplus.
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Strength of private consumption and increased investment should raise growth to 5% sought.
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While public consumption continues its slimming course, industrial production in June rose to a rate of increase at 6.0% year-on-year. Significantly, in line with the strength of investment mentioned above, industrial production of capital goods was up by 17.4% compared with the same period the year before. On the demand side, things continued along the same lines as supply, a tendency to synchronization that does not seem to be taking place in Argentina. Retail sales in June were up showing an increase of 11.6% year-on-year, with a stronger level in the first half-year than last year.
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Inflation moves up to still moderate 3.7% but unemployment holds close to 15%.
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Inflation remains under control in spite of the rise in July that put it at 3.7% year-on-year with levels close to an all-time low and moderate compared with its trading partners. The appreciation of the currency should not mean a loss of competitiveness given that the starting point is that of a low-cost currency. In spite of the rise in the deficit in the services balance, the trade balance continued to maintain a positive figure which in the 12 months ending in July came to 45 billion dollars. In this positive context, the unemployment rate in the São Paulo district again dropped slightly in June going to 14.9% of the labour force, which meant maintaining it at excessively high levels.
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